The Asstt. Commissioner of Income-tax, Bathinda V. M/s. V.R.A. Cotton Mills Pvt. Ltd, Abohar

ITA 449/ASR/2013

• Counselvise Citation: 44920914 RSA 2013
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 03-12-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 19-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: PADAM BAHL
• Keywords: Opportunity of being heard; Proportionate interest; Commercial expediency
• Section: 143(3); 80IB; 194C; 32; 27; 263; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.449(ASR)/2013 ASSESSMENT YEAR:2008-09 PAN :AABCV3100A THE ASSTT. COMMR. OF INCOME TAX, VS. M/S.V.R.A. COT TON MILLS PVT. CIRCLE-II, BATHINDA. FAZILKA ROAD, ABOHAR. (APPELLANT) (RESPONDENT) C.O. NO.43(ASR)/2013 (ARISING OUT OF ITA NO.449(ASR)/2013) ASSESSMENT YEAR : 2008-09 M/S.V.R.A. COTTON MILLS PVT. VS. THE ASSTT. COMM R. OF INCOME TAX, FAZILKA ROAD, ABOHAR. CIRCLE-II, BATHINDA. (APPELLANT) (RESPONDENT) DEPARTMENT BY:SH.TARSEM LAL, DR ASSESSEE BY:SH.PADAM BAHL, CA DATE OF HEARING: 03/12/2013 DATE OF PRONOUNCEMENT:13/12/2013 ORDER PER BENCH ; THIS APPEAL OF THE REVENUE ARISES FROM THE ORDER OF THE CIT(A), BATHINDA DATED 19.03.2013 FOR THE ASSESSMENT YEAR 2 008-09. THE ASSESSEE HAS ALSO FILED C.O. THE REVENUE RAISED FOLLOWING G ROUNDS OF APPEAL: ITA NO.449(ASR)/2013 C.O.NO.43(ASR)/2013 2 1. THE CIT(A) HAS ERRED BOTH IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF AN AMOUNT OF RS.8.00 LAKHS OUT OF RS.9.00 LAKHS MADE BY THE AO ON ACCOUNT OF NON-CHARGING O F INTEREST ON ADVANCES MADE UNDISPUTEDLY WITHOUT ANY COMMERC IAL EXPEDIENCY, EVEN WHEN IT WAS PAYING HUGE AMOUNTS BY WAY OF INTEREST TO BANKS. 2. THE CIT(A) HAS ERRED BOTH IN LAW AND ON FACTS IN DE LETING THE DISALLOWANCES MADE U/S 40A(IA) IN RESPECT OF VARIOU S PAYMENTS, SOME OF WHICH IT EVEN DID NOT CONTEST IN APPEAL, BY RELYING ON THE PRECEDENCE VALUE OF THE DECISION OF THE HONBLE ITAT [SB] SITTING AT VISHAKAPATNAM IN THE CASE OF MERILYN SH IPING AND TRANSORTS V. ADDL. CIT (2012) 146 TTJ 1, WITHOUT AP PRECIATING THAT THE SAME DECISION HAD BEEN EXPRESSLY STAYED BY THE HONBLE AP HIGH COURT IN THE CASE OF CIT VS. CRESCE NT EXPORT SYNDICATE AS WELL AS THE HONBLE GUJRAT HIGH COURT IN THE CASE OF SIKANDARKHAN N. TUNVAR HAVE EXPRESSLY DECLARED T HAT VERDICT OF THE SPECIAL BENCH IN THE CASE OF SAID MERILYN SH IPPING WAS NOT GOOD LAW. 3. THE CIT(A) HAS ERRED BOTH IN LAW AND ON FACTS IN DE LETING THE DISALLOWANCES MADE IN RESPECT OF VARIOUS INSTANCES OF RECEIPTS OUT OF THE CLAIM OF DEDUCTION U/S 80IB, WITHOUT APP RECIATING THE FACT THAT THE ASSESSEE HAD ITSELF NOT CONTESTED MAN Y OF THE INSTANCES OF DISALLOWANCE AT THE APPELLATE STAGE. 4. THE APPELLANT CRAVES LIBERTY TO ADD OR AMEND ANY GR OUND OF APPEAL BEFORE THE APPEAL IS HEARD AND DISPOSED OFF. 2. THE ASSESSEE IN ITS C.O. HAS RAISED FOLLOWING GR OUNDS: 1. THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE THE LD. CIT(A), ERRED IN RESTRICTING THE DISALLOWANCE OF INTERE ST ON RS.100000/- ADVANCED ON 07.07.2007 TO SH. VINOD AHUJA WHICH A S FAIRLY COVERED BY CURRENT YEARS PROFIT ON 63.23 LACS AN D OPENING PROFIT OF RS.107.26 LACS. 2. THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE THE L D. CIT(A), ERRED IN NO ADJUDICATING THE ISSUE ON MERITS RELAT ING TO ITA NO.449(ASR)/2013 C.O.NO.43(ASR)/2013 3 DISALLOWANCE OF EXPENDITURE O THE ASSUMPTION OF APP LICABILITY OF SECTION 40(A)(IA) INSPITE OF THE FACTS. A) THAT REIMBURSEMENT EXPENSES AMOUNTING TO RS.12468975/- WERE NOT IN BY 194-C & WERE NOT SUBJ ECT TO TDS PROVISION IN VIEW OF CBDT CIRCULAR NO.715 DATED 08.08.1995 & ON THE PRINCIPAL OF CONSISTENCY, THE SAME WERE LIABLE TO BE DELETED IN VIEW OF ACCEPTANC E OF THE CONTENTION IN A.T.2009-10. B) THAT OCEAN FREIGHT BILLS AMOUNTING TO RS.10802022/- RAISED ON THE NARENDRA LOGISTICS PVT. LTD. BY THE N ON- RESIDENT SHIPPERS OR THEIR AGENTS & LATER ON REIMBU RSED BY THE APPELLANT ARE OUTSIDE THE PURVIEW OF SECTION 194C IN VIEW OF SECTION 172 OF THE ACT & CBDT CIRCLER NO.723 DATED 09.09.1995. C) THAT NARENDRA LOGISTICS PVT. LTD. AS AN AGENT HAS DEDUCTED AT SOURCE ON VARIOUS PAYMENTS, REIMBURSED BY THE APPELLANT, TOWARDS STUFFING CHARGES, FUMIGATION CHARGES, EMPTY CONTAINER CHARGES, TRANSPORTATION CH ARGES AND THEREFORE ARE OUT OF PURVIEW OF SECTION 194C D) THAT PAYMENTS TOWARDS HOUSE CHARGES TO CENTRAL WARE HOUSING CORPORATIOON ( A GOVT. OF INDIA UNDERTAKING ) CFL-KANDLA & INDIA RAILWAYS, REIMBURSED BY THE APPELLANT ARE OUT OF PURVIEW OF SECTION 194C IN VIE W OF CBDT CIRCULAR NO.699 DATED 30.01.1997 & SECTION 196 . E) THAT TAX HAS BEEN DEDUCTED & PAID ON PAYMENT OF RS.345500/-(94500+93000+158000) TO P.H. LOGISTIC PV T. LTD. & RS.19000/- TO SANJAY ROAD LINES. HENCE, NOT HIT BY SEC. 40(A)(IA). F) THAT PAYMENT OF RS.180817/- TO M/S. GOPI CHAND PARM A NAND AHUJA A HANDLING AGENT DOES NOT FALL WITH IN T HE PURVIEW OF SEC. 194C AS PAYMENT WAS MADE BY THE AGE NT TO VARIOUS INDIVIDUAL PERSONS/WAGES ACH BELOW RS.20000/- AND TOTAL DURING THE YEAR DOES NOT EXCEE D RS.50000/-. G) THAT PAYMENT OF TAXI CHARGES AMOUNTING TO RS.34498/ - TO NAKUL TRAVELS, RAJKOT THROUGH EMPLOYEES RAJESH SACHDEVA & GOPAL RATHI LOOKING AFTER EXPORT BUSINES S IN GUJARAT DOES NOT FALL WITH IN THE PURVIEW OF SECTIO N 194C IN VIEW OF CBDT CIRCULAR NO.716 DT. 08.08.1995 (ANSWER TO QUESTION NO.6 OF THE CIRCULAR). ITA NO.449(ASR)/2013 C.O.NO.43(ASR)/2013 4 H) THAT LABOUR PAYMENTS AMOUNTING TO RS.74993/- MADE THROUGH EMPLOYEES RAJESH KUMAR TO VARIOUS DAILY WA GES DOES NOT FALL WITH IN THE PURVIEW OF SEC. 194C EACH BEING BELOW RS.20000/-. I) THAT PAYMENTS AMOUNTING TO RS.61820/- MADE TO KIMTI LAL SHARMA AGENT OF THE APPELLANT COMPANY INTER-ALI A INCLUES PAYMENTS MADE TO INDIA RAILWAYS FOR FREIGH T AMOUNTING TO RS.34300/-(20080+14220) BESIDES SERVIC E CHARGES AT RS.4800/- & REIMBURSEMENT OF OTHER EXPEN SES. THAT PAYMENT OF RS.200000/- MADE TO CONTAINER CORPORATION OF INDIA LTD. ( A GOVT. OF INDIA UNDER TAKING) IS HIT BY SEC. 40(A)(IA) AS NO TAX IS REQUIRED TO BE DEDUCTED IN VIEW OF SEC. 196 & CBDT CIRCULAR NO.699 DATED 30.01.1995. J) THAT THE PAYMENT OF RS.176662/- TO FREIGHT WAYS LUDHIANA AGAINST THEIR INVOICE NO.736 DATED 03.12.2 007 TOWARDS OCEAN FREIGHT HANDLING CHARGES, FUMIGATION CHARGES ETC. IS NOT HIT BY SEC. 40(A)(IA) AS NO TDS IS REQUIRED IN RESPECT OF OCEAN FREIGHT IN VIEW OF SEC . 173 CVDT CIRCULAR NO.723 DATED 09.09.1995. OTHER PAYMENTS BEING LESS THAN RS.50000/- ARE OUT OF PUR VIEW OF SECTION 194C. 3. THE BRIEF FACTS IN GROUND NO.1 OF THE REVENUE AN D GROUND NO.1 OF THE C.O. OF THE ASSESSEE ARE THAT DURING THE ASSESSMENT YEAR 2009-10, A SUM OF RS.41,08,467/- HAS BEEN DEBITED ON ACCOUNT OF INTER EST PAID TO BANK FOR LOANS RAISED FROM BANK BUT THE ASSESSEE ADVANCED LOAN TO SH. VINOD AHUJA, HUF ON WHICH NO INTEREST WAS CHARGED. THE ASSESSEE HAS FAILED TO PROVE THAT THE ABOVE SAID LOAN WAS GIVEN FOR ANY BUSINESS PURPOSE OR ON ACCOUNT OF ANY COMMERCIAL EXPEDIENCY. ITA NO.449(ASR)/2013 C.O.NO.43(ASR)/2013 5 3.1. THE AO HAS FOLLOWED THE DECISIONS OF VARIOUS C OURTS OF LAW IN THIS REGARD WHILE MAKING THE DISALLOWANCE OF RS.1,05,000 /- OF THE PROPORTIONATE INTEREST. 4. THE LD. CIT(A) TOOK INTO CONSIDERATION ONLY RS.1 ,00,000/- ADVANCED DURING THE YEAR I.E. ON 07.07.2007 AND ACCORDINGLY DIRECTED THE A.O. TO RECOMPUTE THE DISALLOWANCE OF INTEREST ON THE ADVA NCE OF RS. 1,00,000/- AND DELETE THE DISALLOWANCE ON THE INTEREST WITH RESPEC T TO RS.8,00,000/- ADVANCED IN EARLIER YEARS. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NOTHING BROUGHT ON RECORD BY THE AO THAT T HE SAID AMOUNT OF RS.8,00,000/- HAS NOT BEEN ADVANCED OUT OF INTEREST FREE FUNDS INSPITE OF THE CLAIM OF THE ASSESSEE IN THE PRECEDING YEARS. AS RE GARDS ADVANCING OF RS.1,00,000/-, NOTHING HAS BEEN BROUGHT ON RECORD B Y THE ASSESSEE BEFORE ANY OF THE AUTHORITIES BELOW OR EVEN BEFORE US THAT THE SAID SUM HAS BEEN ADVANCED OUT OF INTEREST FREE FUNDS. ACCORDINGLY, WE FIND THAT THE LD. CIT(A) HAS RIGHTLY CONFIRMED THE DISALLOWANCE OF I NTEREST WITH REGARD TO ADVANCING OF SUM OF RS. 1,00,000/- DURING THE IMPUG NED YEAR. WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND THE S AME IS UPHELD. THUS, GROUND NO.1 OF THE REVENUE AND GROUND NO.1 OF THE A SSESSEE ARE DISMISSED. ITA NO.449(ASR)/2013 C.O.NO.43(ASR)/2013 6 6. NOW, WE TAKE UP GROUND NO.2 OF THE REVENUE AND G ROUND NO. OF THE C.O. OF THE ASSESSEE. THE BRIEF FACTS OF THE CASE A RE THAT THE ASSESSEE HAS CLAIMED RS.1,94,24,029/- IN THE EXPORT EXPENSES ACC OUNT FOR PAYMENTS ON ACCOUNT OF OCEAN FREIGHT, LABOUR CHARGES ETC. AND S ERVICE CHARGED. THE AO OBSERVED THAT TDS WAS NOT DEDUCTED ON THE AMOUNT OF RS.1,23,96,887/- WHICH WAS PAID BY THE ASSESSEE ON ACCOUNT OF OCEAN FREIGHT AND LABOUR CHARGES ETC. IT WAS FURTHER OBSERVED THAT BY THE AO THAT THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE ON TRUCK FREIGHT PAYMENTS D EBITED IN THE EXPORT EXPENSES ACCOUNT. THE PAYMENTS WITHOUT DEDUCTION OF TAX AT SOURCE WERE MADE TO SH. SOHAN SINGH AGAINST TROLLY FREIGHT WHIC H WERE DEBITED IN THE NARMA LABOUR ACCOUNT. A SHOW CAUSE NOTICE WAS GIVEN AS TO WHY THE DEDUCTION CLAIMED ON TAX AT SOURCE HAS NOT BEEN DED UCTED TO BE NOT DISALLOWED U/S 40(A)(IA) OF THE ACT. THE ASSESSEE S UBMITTED REPLY DATED 20.12.2010, WHICH DID NOT FIND FAVOUR TO THE AO. T HE RELEVANT FINDINGS OF THE AO FOR THE SAKE OF CONVENIENCE ARE REPRODUCED HEREUNDER WHERE THE AO MADE A DISALLOWANCE OF RS.1,42,58,665/- AS UNDER: THE REPLY OF THE ASSESSEE HAS BEEN CAREFULLY CONS IDERED. THE PAYMENT OF RS.1,23,96,887/- MADE TO M/S. NARENDERA LOGISTICS PVT. LTD. IS IN THE NATURE OF CONTRACT PAYMENT FOR TRANS PORTATION OF GOODS OF ASSESSEE BY SEA AND OTHER RELATED WORK INVOLVED IN THE TRANSPORTATION AND THEREFORE, PROVISIONS OF SECTION 194C ARE APPLI CABLE. THE ASSESSEE WAS REQUIRED TO DEDUCT TRDS ON THE SAID PA YMENT . ITA NO.449(ASR)/2013 C.O.NO.43(ASR)/2013 7 FURTHER, THE PROVISIONS OF SECTION 194C HAVE BEEN C LARIFIED IN CIRCULAR NO.715 DATED 08.08.1995 OF CBDT REPORTED A T (1995) 127 CTR (ST.) 3. THE PAYMENT MADE TO M/S. NARENDERA LOG ISTICS PVT. LTD. CANNOT BE SAID AS REIMBURSEMENT OF EXPENSES AS THE SAID PARTY HAS ACTED AS INDEPENDENT CONTRACTOR. EVEN IF THE ACADEM IC DISCUSSION, IT IS SUBMITTED THAT THE SAID PAYMENT WAS IN THE NATURE O F REIMBURSEMENT OF EXPENSES AS THE SAID PARTY HAS ACTED AS INDEPENDENT CONTRACTOR. EVEN IF FOR ACADEMIC DISCUSSIONS, IT IS ASSUMED THAT THE SAID PAYMENT WAS IN THE NATURE OF REIMBURSEMENT OF EXPENSES, THE FOLLOW ING PROVISIONS CONTAINED IN CIRCULAR CLEARLY SHOW THAT ASSESSEE WA S REQUIRED TO DEDUCT TAX ON ENTIRE PAYMENT MADE TO M/S. NARENDERA LOGISTICS PVT. LTD. INCLUDING REIMBURSEMENT OF EXPENSES: CIRCULAR NO.715 CLARIFICATION ON VARIOUS PROVISIONS RELATING TO TA X DEDUCTION AT SOURCE REGARDING 08/08/1995 TDS SECTIONS 194C, 194J, 194-!, 194K, 194A, 190, THE FINANCE ACT, 1955, HAS ENLARGED THE SCOPE OF I NCOME TAX DEDUCTION AT SOURCE BY MAKING VARIOUS AMENDMENTS. I N REGARD TO THE CHANGES, INTRODUCED THROUGH THE FINANCE ACT, 1995, A NUMBER OF QUERIES HAVE BEEN RECEIVED FROM THE VARIOUS ASSOCIA TIONS AND PROFESSIONAL BODIES ON THE SCOPE OF TAX DEDUCTION A T SOURCE. IT WOULD BE DESIRABLE TO CLARIFY THE DOUBTS BY ISSUING A PUB LIC CIRCULAR IN THE FORM OF QUESTION ANSWERS AS UNDER: QUESTION 1. . QUESTION 6: WHETHER PAYMENT UNDER A CONTRACT FOR C ARRIAGE OF GOODS OR PASSENGERS BY ANY MODE OF TRANSPORT WOULD INCLUD E PAYMENT MADE TO A TRAVEL AGENT FOR PURCHASE OF A TICKET OR PAYME NT MADE TO A CLEARING AND FORWARDING AGENT FOR CARRIAGE OF GOODS ? ANSWER: THE PAYMENTS MADE TO A TRAVEL AGENT OR AN AIRLINE FOR PURCHASE OF A TICKET FOR TRAVEL WOULD NOT BE SUBJEC TED TO TAX DEDUCTION AT SOURCE AS THE PRIVITY OF THE CONTRACT IS BETWEEN THE INDIVIDUAL PASSENGER AND THE AIRLINE/TRAVEL AGENT, NOTWITHSTAN DING THE FACT THAT ITA NO.449(ASR)/2013 C.O.NO.43(ASR)/2013 8 THE PAYMENT IS MADE BY AN ENTITY MENTIONED IN SECTI ON 194C(1). THE PROVISION OF SECTION 194C SHALL, HOWEVER, APPLY WH EN A PLANE OR A BUS OR ANY OTHER MODE OF TRANSPORT IS CHARTERED BY ONE OF THE ENTITIES MENTIONED IN SECTION 194C OF THE ACT. AS REGARDS PA YMENTS MADE TO CLEARING AND FORWARDING AGENTS FOR CARRIAGE OF GOOD S, THE SAME SHALL BE SUBJECTED TO TAX DEDUCTION AT SOURCE U/S 194C OF THE ACT. QUESTION 7: WHETHER A TRAVEL AGENT/CLEARING AND FO RWARDING AGENT WOULD BE REQUIRED TO DEDUCT TAX AT SOURCE FROM THE SUM PAYABLE BY THE AGENT TO AN AIRLINE OR OTHER CARRIER OF GOODS OR PA SSENGERS ? ANSWER: THE TRAVEL AGENT, ISSUING TICKETS ON BEHAL F OF THE AIRLINES FOR TRAVEL OF INDIVIDUAL PASSENGERS, WOULD NOT BE R EQUIRED TO DEDUCT TAX AT SOURCE AS HE ACTS ON BEHALF OF THE AIRLINES. THE POSITION OF CLEARING AND FORWARDING AGENTS IS DIFFERENT. THEY A CT AS INDEPENDENT CONTRACTORS. ANY PAYMENT MADE TO THEM WOULD HENCE B E LIABLE FOR DEDUCTION OF TAX AT SOURCE. THEY WOULD ALSO BE LIA BLE TO DEDUCT TAX AT SOURCE WHILE MAKING PAYMENTS TO A CARRIER OF GOODS. . QUESTION NO.3: WHETHER THE DEDUCTION OF TAX AT SOU RCE U/S 194C AND 194J HAS TO BE MADE OUT OF THE GROSS AMOUNT OF THE BILL INCLUDING REIMBURSEMENTS OR EXCLUDING REIMBURSEMENT FOR ACTUA L EXPENSES? ANSWER: SECTION 194C AND 194J REFER TO ANY SUM PAI D. OBVIOUSLY, REIMBURSEMENTS CANNOT BE DEDUCTED OUT OF THE BILL A MOUNT FOR THE PURPOSE OF TAX DEDUCTION AT SOURCE. . AS SUCH SINCE THERE IS NO MENTION OF AFORESAID CIR CULAR IN THE JUDGMENT OF HONBLE ITAT, DELHI D BENCH IN THE CA SE OF GRANDPIX FAB. PVT. LTD. (SUPRA), THIS CIRCULAR HAS NOT BEEN CONSIDERED BY IT. THE FACTS OF THE CASE ARE CLEAR THAT THE ASSESSEE HAS P AID EXPORT EXPENSES AMOUNTING TO RS.1,23,96,887/- ON WHICH TDS WAS NOT DEDUCTED THOUGH REQUIRED TO BE DEDUCTED U/S CHAPTER XVII-B OF THE I.T.ACT,1961. THE PROVISIONS OF SECTION 194-C HAVE NOT BEEN COMPLIED BY THE ASSESSEE AND THEREFORE, PROVISIONS OF SECTIO N 40(A)(IA) ARE APPLICABLE IN THE CASE. IN VIEW OF ABOVE, THE CLAIM OF DEDUCTION OF ITA NO.449(ASR)/2013 C.O.NO.43(ASR)/2013 9 RS.1,23,96,887/- IS DISALLOWED U/S 40(A)(IA) AND AD DITION SAID AMOUNT IS MADE IN THE INCOME RETURNED. FURTHER, IN RESPECT OF OTHER PAYMENTS DEBITED IN THE EXPORTS EXPENSES ACCOUNT LIKE TRUCK FREIGHT TO RANJIT TRAN SPORT, IT IS SEEN THAT THE TOTAL PAYMENTS MADE TO THIS PARTY FAR EXCEED TH E LIMIT OF RS.50,000/- IN THE YEAR. THE ASSESSEE HAS DEDUCTED TDS ON PAYMENTS MADE TO THE PARTY EXCEPT FOR THE AMOUNTS MENTIONED BELOW. IN CASE OF PAYMENTS MADE TO OTHER PARTIES ALSO, IT IS SEEN THA T IN ALL THE CASES THE TOTAL PAYMENTS MADE EXCEEDED THE AFORESAID LIMIT. I N THE CASE OF TAXI CHARGES PAID TO M/S. NAKUM TRAVELS, SINGLE PAYMENT MADE ON 18.01.2008 EXCEED THE LIMIT OF RS.20,000/-. THE REG ULARITY WITH WHICH THE PAYMENTS HAVE BEEN MADE SHOW THAT ASSESSEE HAD ENTERED INTO CONTRACT AGREEMENT, MAY BE ORAL, WITH THEM FOR PROV IDING SERVICES. THEREFORE, THE PROVISIONS OF SECTION 194C ARE APPLI CABLE. THE DETAILS OF PAYMENTS MADE TO THESE PARTIES ON WHICH TDS WAS NOT DEDUCTED ARE GIVEN BELOW: PAYMENTS DEBITED IN THE EXPORTS EXPENSES ACCOUNT W ITHOUT TDS S.NO., DATE DESCRIPTION AMOUNT 1. 13.09.2007 21.12.2007 TRUCK FREIGHT IN RANJIT TPT 21450 ---DO- 1900 0 40,450 2. 22.11.2007 CORPORATION OF INDIA FOR FREIGHT (PAID TO CONTRACTOR 200.000 3. 27.11.2007 27.11.2207 27.11.2007 27.11.2007 29.11.2007 05.12.2007 TRUCK FREIGHT (MMGT CO.) 13300 -DO- 66 50 ---DO- 665 0 ----DO---- 13300 ---DO--- 6650 ----DO--- 6650 53,200 4. 04.12.2007 CONTAINER FREIGHT 176,662 5. 31.03.2008 31.03.2008 31.03.2008 TRUCK FREIGHT FROM BABRA TO MUNDRA PORT 94500 -DO (HADAMATALA TP MUNDRA PORT) 93000 -DO- (BABRA TO MUNDRA PORT) 15800 0 345,500 6. 31.12.2007 31.12.2007 31.12.2007 31.12.2007 31.12.2007 TRUCK FREIGHT, JAFFERY COMMISSION M/S. GOPI RAM PARMA NAND AHUJA 13617 --DO 13606 --DO- 13620 --DO-- 13653 180,817 ITA NO.449(ASR)/2013 C.O.NO.43(ASR)/2013 10 31.12.2007 31.12.2007 31.12.2007 31.12.2007 31.01.2008 31.01.2008 31.01.2008 31.01.2008 31.03.2008 31.03.2008 31.03.2008 --DO- 13020 --DO- 13055 --DO-- 13046 --DO- 13039 --DO- 17581 -DO- 17193 -DO- 17224 -DO- 17208 -DO- 1705 --DO-- 1750 -DO- 1500 7. 04.01.2008 04.01.2008 20.02.2008 31.03.2008 COTTON TESTING FROM INDIA COMM..10580 -DO- 42310 -DO- 25735 -DO- 18395 97,020 8. 16.01.2008 31.03.2008 31.03.2008 31.03.2008 BROKERAGE TO HARISH BUDH DEV 112500 -DO- 90000 -DO 21750 -DO- 1 74000 298,250 9. 18.01.2008 11.02.2008 19.02.2008 20.02.2008 TAXI CHARGES NAKUM TRAVELS 21550 -DO- 9916 -DO- 1200 -DO- 1832 34,498 10. 19.02.2008 20.02.2008 20.02.2008 MAHESHWARI HANDLING PVT. LTD. 13500 -DO- 26500 -DO- 30000 70,000 11. 18.02.2008 18.02.008 19.02.2008 CASH PAYMENT OF LABOUR TO RAJESH 36433 -DO- 13560 -DO- 25000 74,993 12 05.03.2008 05.03.2008 FREIGHT BILL TO KIMTI LAL SHARMA 34090 ---DO-- 27730 61,820 13 14.03.2008 OCEAN FREIGHT TO SHREYAS RELAY SYSTEM 50 837 50,837 TOTAL 1,784,047 DETAILS OF PAYMENTS MADE TO SH. SOHAN SINGH WITHOUT TDS SR. NO. DATE DESCRIPTION AMOUNT 1 1 0.12.2007 24.12.2007 29.12.2007 02.01.2008 07.01.2008 14.01.2008 18.01.2008 PAID TO SOHAN SINGH AGAINST TROLLY FREIGHT 1600 -DO- 7327 -DO- 4124 -DO- 2955 -DO- 3603 -DO 2620 -DO- 2120 ITA NO.449(ASR)/2013 C.O.NO.43(ASR)/2013 11 19.01.2008 21.01.2008 23.01.2008 07.02.2008 08.02.2008 09.02.2008 11.02.2008 12.02.2008 13.02.2008 14.02.2008 19.02.2008 25.02.2008 25.02.2008 26.02.2008 28.02.2008 28.02.2008 29.02.2008 01.03.2008 01.03.2008 03.03.2008 06.03.2008 08.03.2008 08.03.2008 08.03.2008 12.03.2008 13.03.2008 14.03.2008 15.03.2008 17.03.2008 21.03.2008 26.03.2008 29.03.2008 29.03.2008 -DO- 1382 -DO- 1460 -DO- 950 -DO- 1523 -DO- 850 -DO- 850 -DO- 680 -DO- 1360 -DO- 680 -DO- 612 -DO- 1470 -DO- 800 -DO- 1530 -DO- 812 -DO 800 -DO- 864 -DO- 800 -DO- 665 -DO- 761 -DO- 579 -DO- 920 -DO- 931 -DO- 822 -DO- 828 -DO- 960 -DO- 707 -DO 850 -DO- 848 -DO- 756 -DO 1428 -DO- 1468 -DO 940 -DO 1496 PAYMENTS FOUND IN SOHAN SINGHS A/C BUT NOT IN TDS PAYABLE LIST) -DO - 276 -DO- 3260 -DO- 1171 -DO- 16297 77,731 SINCE THE ASSESSEE HAS MADE CONTRAVENTION OF SECTI ON 194C OF THE INCOME TAX ACT, 1961, THE AFORESAID EXPENDITURE DEB ITED IN THE PROFIT & LOSS ACCOUNT IS DISALLOWED U/S 40(A)(IA) OF THE I NCOME TAX ACT. THE TOTAL AMOUNT OF DISALLOWANCE COMES TO RS.1,42,58,66 5/- ITA NO.449(ASR)/2013 C.O.NO.43(ASR)/2013 12 (RS.1,123,96,887/- + RS.17,84,047/- + RS.77,731/-). ADITION OF SAID AMOUNT IS MADE IN THE INCOME RETURNED. 7. BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED T HE SUBMISSIONS ALONGWITH SOME EVIDENCES WHICH WERE FORWARDED TO TH E A.O. AND AFTER CONSIDERING THE SUBMISSIONS AND EVIDENCES AND REPOR T OF THE A.O., THE LD. CIT(A) DELETED THE ADDITION OF RS.1,42,58,665/- AN D THE RELEVANT FINDINGS OF THE LD. CIT(A) FOR THE SAKE OF CONVENIENCE ARE REPR ODUCED HEREUNDER: IN VIEW OF THE LAW DISCUSSED SUPRA, I FIND FORCE IN THE CONTENTION OF THE A/R OF THE APPELLANT: 1. THAT THE PROVISIONS OF SECTION 40(A)(IA) ARE ONLY A PPLICABLE FOR MAKING DISALLOWANCE OF THE EXPENSES ON ACCOUNT OF N ON DEDUCTION OF TAX AT SOURCE WHERE THE AMOUNT OF EXPE NSES IS PAYABLE AT THE END OF THE YEAR. BUT IN THE CASE OF THE APPELLANT, THE EXPENSES WERE PAID DURING THE YEAR AND THERE WA S NO OUTSTANDING AT THE END OF THE YEAR. I FURTHER FIND THAT THE JAIPUR, HYDERABAD & AMRITSAR BENCHES OF ITAT HAS DECIDED TH IS ISSUE IN THE CASE OF JAIPUR VIDYUT VITRAN NIGAM LTD. VS. DCIT AND TEJA CONSTRUCTIONS VS. ACIT, JAMKASH VEHICLEADES PV T. LTD. JAMMU VS. ADDL. CIT & AMAR CEMENT SICOP INDUSTRIAL ESTATE, KATHUA VS. ITO HAS DECIDED THIS ISSUE IN FAVOUR O F THE APPELLANT AND THE OPERATION OF THESE JUDGMENTS HAS NOT BEEN STAYED BY ANY OF THE HIGH COURTS. THE DEPARTMENT HA S FAILED TO POINT OUT ANY JUDGMENT OF ANY HIGH COURT WHICH IS AGAINST THE APPELLANT ON THIS ISSUE. 2. THE AO WHILE FRAMING ASSESSMENT U/S 143(3) FOR A.Y. 2009-10 HAS ACCEPTED THE CONTENTIONS OF THE A/R OF THE APPE LLANT ON MERITS THAT THE APPELLANT WAS NOT LIABLE TO DEDUCT TAX AT SOURCE ON THE EXPENSES DEBITED UNDER THE HEAD EXPORT EXPE NSES AND NARMA ACCOUNT AND DID NOT MAKE ANY DISALLOWANCE U /S 40(A)(IA) AND THE ISSUE IS COVERED BY THE JUDGMENT OF HONBLE SUPREME COURT AND JURISDICTIONAL ITAT DISCUSSED SUP RA. ITA NO.449(ASR)/2013 C.O.NO.43(ASR)/2013 13 IN VIEW OF THE FACTS AND LAW DISCUSSED SUPRA, I DI RECT THE AO TO DELETE THE ADDITION OF RS.1,42,58,665/- ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE FOR NON DEDUCTION OF T AX AT SOURCE, U/S 40(A)(IA). SINCE I HAVE DECIDED THE APPEAL ON LEGAL ISSUE, I HAVE NEITHER DISCUSSED NOR ADJUDICATED THE CONTENTIONS OF THE A /R OF THE APPELLANT THAT THE APPELLANT WAS NOT LIABLE TO DED UCT TAX AT SOURCE FROM THE EXPENDITURE RELATING TO EXPORT. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. IT HAS BEEN CONCEDED BY BOTH THE PARTIES THAT ON LE GAL ISSUE I.E. U/S 40(A)(IA) OF THE ACT, THE ISSUE IS COVERED AGAINST THE ASSESS EE AND IN FAVOUR OF THE REVENUE BY THE DECISION OF THE ITAT, AMRITSAR BENC H, IN ITA NO.326(ASR)/2010 FOR THE ASSESSMENT YEAR 2005-06 IN THE CASE OF ITO, WARD 2(1), BATHINDA VS. M/S. MAHAVIR COTTON TRADERS, BUC HO MANDI AND C.O. NO.19(ASR)/2010, VIDE ORDER DATED 30/05/2013. THE R ELEVANT DECISION OF THE ITAT, AMRITSAR IS REPRODUCED FOR THE SAKE OF CONVEN IENCE AS UNDER: 4. THE BRIEF FACTS IN REVENUES APPEAL AND C.O. O F THE ASSESSEE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIR M AND DOING THE BUSINESS OF COTTON SEED GINNING AND HAVING TAKEN ON RENT THE FACTORY OF M/S. SHRI BALAJI OIL MILLS, BHUCHO IN ACCORDANCE WITH THE COMPOSITE AGREEMENT DATED 01.09.2004 CONTAINING THE REIN FIXED RENT @ RS.45/- PER QTL. OF THE COTTON SEED TO BE CRUSHED WHEREBY M/S. SHRI BALAJI OIL MILLS CANNOT WORK FOR ANY OTHER FIRM EX CEPT THAT OF THE ASSESSEE. THUS, COMPLETE POSSESSION AND ENJOYMENT O F THE FACTORY WAS AT THE DISPOSAL OF THE ASSESSEE. 5. THE RETURN OF INCOME WAS FILED ON 26.09.2005 AT AN INCOME OF RS.47,770/- WHEREIN THE CLAIM OF EXPENSES OF RS.14, 61,285/- WAS MADE HAVING BEEN PAID TO M/S. SHRI BALAJI OIL MILLS , BHUCHO TOWARDS ITA NO.449(ASR)/2013 C.O.NO.43(ASR)/2013 14 CRUSHING OF BINOLA AFTER HAVING CHARGED THE SAME A GAINST THE INCOME WHEREUPON TAX WAS NOT DEDUCTED ON THE SAID PAYMENTS . 6. THE RETURNED INCOME WAS PROCESSED UNDER SECTION 143(1) OF THE ACT ON 22.05.2006 WHICH WAS SUBSEQUENTLY TAKEN UP F OR SCRUTINY THROUGH ISSUANCE AND SERVICE OF NOTICE U/S 143(2) O F THE ACT, DATED 25.07.2006 AND CONSEQUENTLY SCRUTINY ASSESSMENT WA S COMPLETED ON THE ADDITION OF RS.50,200/-, THUS DETERMINING THE T OTAL INCOME OF THE ASSESSEE AT RS.97,980/- THROUGH ORDER OF THE A.O. D ATED 28.02.2005. SINCE THE PROCEEDINGS WERE INITIATED THROUGH ISSUAN CE OF NOTICE UNDER SECTION 263(1) OF THE I.T.ACT, 1961, DATED 12.03.20 09 & 19.03.2009 AND IN RESPONSE TO WHICH THE SUBMISSIONS WERE ADVAN CED ON 30.03.2009 WHEREBY THE COMMENTS OF THE AO TOO WERE CALLED FOR ON 30.03.2009 THROUGH LETTER NO. 200 NOT BEING CONVINC ED, THE ASSESSMENT ORDER WAS HELD TO BE ERRONEOUS AND PREJU DICIAL TO THE INTEREST OF THE REVENUE FOR WHICH THE FINDINGS ARE EXTRACTED BELOW: IN VIEW OF THE ABOVE MENTIONED AND LEGAL POSITION, IT IS HELD THAT IT IS A FIT CASE FOR INVOKING THE PROVISIONS OF SECTION 263 OF THE I.T. ACT, 1961, AS THE ASSESSMENT FRAMED BY THE A.O. ON 28.0 2.2007 U/S 143(3) IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. ACCORDINGLY, THE ASSESSMENT FRAMED BY THE I.T.O., WARD-II(1), BATHINDA ON 28.02.2007 U/S 143(3) OF THE I.T. ACT , 1961 IS CANCELLED U/S 263 OF THE ACT AND THE A.O. IS DIRECTED TO FRA ME FRESH ASSESSMENT, IN THE LIGHT OF THE OBSERVATIONS MADE BY THE UNDER SIGNED IN THE FOREGOING PARAGRAPH 7. THE REVISION ORDER DATED 31.03.2009 HAS ATTAINE D FINALITY UNDISPUTEDLY ON LEGALITY WHEREAS CONSEQUENTIAL THE FRESH NOTICE UNDER SECTION 143(2) DATED 22.05.2009 WAS ISSUED AND SERV ED WHEREBY THE PROCEEDINGS WERE CONTINUED AND CONCLUDED UNDER SECT ION 143(3) OF THE ACT VIDE ORDER DATED 02.10.2009 AT AN ASSESSED INCOME OF RS.15,59,270/- WITH THE UNDER-STATED FINDINGS: AS STATED EARLIER IN THE FOREGOING PARAGRAPHS, TH E ASSESSEE FAILED TO DEDUCT TDS OUT OF THE CRUSHING CHARGES PAID TO M/S SHREE BALAJI OIL MILLS, BHUCHOO AS PER PROVISIONS OF SECTION 194C, THE TOTAL PAYMENTS FOR WHICH WERE DEBITED TO ASSESSEES PROFIT & LOSS ACCOUNT AT RS. 14,61,285/-. AS SUCH THE EXPENSES DEBITED TO PROFI T & LOSS ACCOUNT AT RS. 14,61,285/- ON ACCOUNT OF CRUSHING CHARGED PAI D TO THE SAID CONCERN ARE NOT ALLOWABLE AS PER PROVISIONS OF SEC TION 40A(IA) OF THE ITA NO.449(ASR)/2013 C.O.NO.43(ASR)/2013 15 INCOME TAX ACT. ACCORDINGLY, THESE EXPENSES ARE DI SALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE ALREADY A SSESSED AS PER ORIGINAL ASSESSMENT. TOTAL INCOME OF THE ASSESSEE IS RE-COMPUTED AS UNDE R:- INCOME AS PER ASSESSMENT ORDER U/S 143(3) DATED 28.02.2007 RS. 97,980/- ADD: DISALLOWANCE OF CRUSHING CHARGES AS DISCUSSED ABOVE RS. 14,61,285/- TOTAL INCOME ASSESSED RS. 15,59,265/- OR SAY RS. 15,59,270/- 8. HOWEVER, THE GRIEVANCE OF THE ASSESSEE CONTINUED , HENCE ORDER DATED 02.10.2009 PASSED BY THE A.O. WAS CHALLENGED IN APPEAL BEFORE THE LD. CIT(A) THROUGH VARIOUS GROUNDS OF APPEAL DA TED 09.11.2009 REPRODUCED HEREIN BELOW PRIMARILY CONFINING TO THE ARGUMENTS TO THE EXTENT ALLOWANCE IS CORRECTLY CLAIMED ACCORDING TO THE PROVISIONS OF SECTION 28 OF THE ACT AND WHICH PROVISIONS ONLY ARE APPLICABLE TO THE FACTS AND CIRCUMSTANCES AND NATURE OF THE CASE. 3. THAT THE LEARNED A.O. ERRED IN MAKING AN ADDITI ON OF RS. 1461285/- KEEPING IN VIEW THE FACTS AND CIRCUMSTA NCES OF THE CASE. 4. THAT RS. 1461285/- WAS PAID FOR OUT SOURCING JOB WORK OF CRUSHING OF BINOLA SO IT IS AN ITEM FALLING UNDER MANUFACTURING/TRADING ACCOUNT. ACCORDING, THE SAME CAN NOT FALL UNDER ANY SECTIONS IN 30 TO 38. ACCORDINGLY, THE ADDITION OF RS. 1461285/- IS LIABLE TO BE DELETED. 5. THAT ITEMS OF EXPENDITURE WHICH DO NOT FALL UNDE R SECTIONS 30 TO 38, CANNOT FALL WITH THE PURVIEW OF SECTIONS 40(A) (IA) OF THE ACT. ACCORDINGLY, THE ADDITION IS LIABLE TO DELETED. 6. THAT THE OMISSION OF NON DEDUCTION OF TDS IS MAD E GOOD BY M/S SHREE BALAJI OIL MILLS, BHUCHO MANDI, AS THAT ASSESSEE HAS SHOWN THE CRUSHING CHARGES IN THEIR RETURN OF INCO ME, SO IN ITA NO.449(ASR)/2013 C.O.NO.43(ASR)/2013 16 VIEW OF EXPLANATION TO S-191 OF THE ACT, THE ADDIT ION OF RS. 1461285/- IS LIABLE TO BE DELETED. 7. THAT THE ASSESSEE HAD NOT DEDUCTED TDS ON THIS O UT SOURCING JOB WORK OF CRUSHING OF BINOLA ON THE ADVICE OF IT S STATUTORY AUDITOR SO THIS ADDITION IS LIABLE TO BE DELETED. 9. BEFORE THE LD. CIT(A), THE CONTENTIONS WERE RAI SED RELYING UPON THE DICTIONARY MEANING TO THE WORD CONTRACTO R, THE DECISION OF JAIPUR VIDYUT VITRAN NIGAM VS. DCIT, J.C. BANSAL , CHIEF ENGINEERS VS. TRO-2 UJJAIN. SECTION 194C, SECTION 40A(IA) AND THE WORDS UTILIZED IN THE FINANCE BILL 2004 CERTAIN OPI NION OF THE AUTHORS AND IN CONSEQUENCE THERETO THE REMAND REPORT OF THE A.O. VIDE LETTER NO.2677 DATED 31.03.2010 WAS CALLED FOR, FOR WHICH WAS PRAYED FOR UPHOLDING AOS ORDER DATED 02.10.2009. HAVING NOTIC ED THE AFORESAID POINTS RAISED BY THE ASSESSEE AND IN THE REMAND RE PORT, THE LD. CIT(A) ALLOWED THE GROUNDS TREATING THE APPEAL PARTLY ALLO WED THROUGH ORDER DATED 06.05.2010 AT PAGES 10 & 11 OF HIS ORDER BY G IVING THE FOLLOWING FINDINGS: I HAVE CONSIDERED THE ARGUMENTS OF LEARNED COUNSE L FOR THE APPELLANT AND THE REMAND REPORT OF THE A.O. ON THIS ISSUE AS WELL AS THE AFORESAID JUDGMENT OF THE HON'BLE SUPREME COURT AND HOLD THA T THE A.O. SHOULD HAVE SEEN THE TRUE NATURE AND QUALITY OF THE RECEI PT AND NOT THE HEAD UNDER WHICH IT IS ENTERED IN THE ACCOUNTS BOOKS OF THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND SHOULD HA VE RECASTED THE PROFIT AND LOSS ACCOUNT AND TRADING ACCOUNT, IN VI EW OF HIS OWN ADMISSION THAT THE CRUSHING CHARGES ARE THE PART O F TRADING/MANUFACTURING ACCOUNT. ACCORDINGLY, THESE CRUSHING CHARGES WOULD FALL UNDER THE PROVISIONS OF SECTION 28 WHIC H DO NOT FIND PLACE IN THE PROVISIONS OF SECTION 40(A)(IA). ACCORDINGL Y, THERE APPEARS TO BE MERIT IN THE ARGUMENTS OF THE APPELLANT THAT THIS AMOUNT OF CRUSHING CHARGES CANNOT BE DISALLOWED ON THE BASIS OF PROVI SIONS OF SECTION 40(A)(IA). THE NEXT GROUND OF APPEAL IS REGARDING THE WORD PA YABLE WHICH IS USED BEFORE THE RESIDENT CONTRACTOR OR SUB -CONTRACTOR. THE LEARNED COUNSEL POINTED OUT THAT THE WORDS USED WER E CREDITED OR PAID IN CLAUSE 11 OF FINANCE BILL, 2004 AT THE TIME OF I TS INTRODUCING IN THE LOK SABHA, BUT WERE SUBSTITUTED BY THE WORD PAYABLE WHILE PASSING ITA NO.449(ASR)/2013 C.O.NO.43(ASR)/2013 17 THE FINANCE BILL IN TO ACT. HE RELIED UPON THE MEAN ING OF WORD PAYABLE FROM THE BLACKS LAW DICTIONARY (5 TH EDITION) AS WELL AS THE OPINION OF THE LEARNED AUTHORS GIVEN AT PAGE 386/87 OF TAXMANS DIRECT TAX LAW AND PRACTICE (AUG, 2009 EDITION). HE ALSO RELIED UPON THE PARA 9.12 OF THE CASE DECIDED BY JAIPUR BENCH O F I.T.A.T. IN THE CASE OF JAIPUR VIDYUT VITRAN NIGAM LIMITED VS. DCIT (2009) 26 DTR TRIBUNAL ORDERS AND FILED ITS PHOTOCOPY AS WELL AS UPON MY DECISION IN THE CASE OF M/S KISHAN MAL OIL COTTON & GINNING FACTORY, RAMPURAPHUL (APPEAL NO. 187-IT-CIT(A)/BTI/09-10 DAT ED 15.04.2010) DECIDED ON THE BASIS OF TEJA CONSTRUCTI ONS VS. ACIT, HYDERABADN A BENCH (I.T.A. NO. 308/HYD/2009 DATED 23.10.2009 FOR THE ASSTT. YEAR 2005-06) REPORTED AT 36 DTR(HYD ) (TRIBUNAL) 220 AND RELIED UPON THE FOLLOWING FINDING GIVEN BY ME I N THAT CASE WHICH ARE BEING REPRODUCED BELOW:- I HAVE GIVEN DUE CONSIDERATION TO THE FACTS OF THE CASE AND THE PROVISIONS OF LAW IN THIS RESPECT. IT IS IMPORTANT TO NOTE THAT FROM THE WORDING OF S. 40(A)(IA), IT IS VERY CLEAR THAT THE SECTION IS APPLICATION ON EXPE NDITURE PAYABLE. IT IS NOT APPLICABLE TO THE EXPENDITURE P AID. THE WORD PAID HAS BEEN DEFINED IN SECTION 43(2) OF THE IN COME-TAX ACT, 1961 WHICH MEANS PAID OR PAYABLE ACCORDING TO THE METHOD OF ACCOUNTING REGULARLY FOLLOWED OR EMPLOYED BY THE A SSESSEE. HOWEVER, THE WORD PAYABLE HAS NO WHERE BEEN DEFI NED IN THE I.T. ACT, 1961. THUS, BY IMPLICATION, THE WORD PA YABLE DOES NOT INCLUDE PAID SIMPLY BECAUSE THERE IS NO SUCH DEFINITION OR DEEMING PROVISION FOR THE WORD PAYABLE. THEREFOR E, IN MY VIEW, THE DISALLOWANCE UNDER SECTION 40(A)(IA) CAN ONLY BE MADE IN RESPECT OF EXPENDITURE WHICH IS PAYABLE AN D IF THE EXPENDITURE HAS ALREADY BEEN PAID, NO SUCH DISALLO WANCE CAN BE MADE. THUS, SECTION 40(A)(IA) IS NOT APPLICABLE WH ERE THE EXPENDITURE IS PAID. IT IS APPLICABLE ONLY IN A CA SES WHERE THE PAYMENTS ARE DUE AND OUTSTANDING. THEREFORE, AFTER GOING THROUGH THE FACTS AND PROVIS IONS OF LAW AND RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HON 'BLE BENCH (DISCUSSED (SUPRA)), I AGREE WITH THE APPELLANT AN D THEREFORE, HOLD THAT PROVISIONS ARE APPLICABLE ONLY IN RESPEC T OF THE EXPENDITURE WHICH REMAINED PAYABLE AT THE END OF T HE YEAR. AFTER PERUSING THE RECORDS, I FIND THAT AS PER THE BALANCE SHEET ITA NO.449(ASR)/2013 C.O.NO.43(ASR)/2013 18 AT THE END OF THE YEAR, ONLY A SUM OF RS. 1649262/ - REMAINED PAYABLE OUT OF RS. 86238103/-. THEREFORE, THE MAXI MUM DISALLOWANCE WHICH COULD BE MADE U/S 40(A)(IA) SHO ULD BE RS. 1649262/-. THE APPELLANT HAS CLAIMED THAT OUT OF T HIS MOST OF THE AMOUNTS PAYABLES ARE ON ACCOUNT OF GOODS SUPPL IED BY THE PAYEE, AMOUNTING TO RS. 1631597/-, BUT THE APPELLA NT HAS FAILED TO ESTABLISH THAT THIS PAYABLE AMOUNT IS AGAINST T HE PURCHASE OF GOODS. HENCE, THIS PLEA OF THE APPELLANT IS NOT AC CEPTED. ON THESE FACTS AND IN VIEW OF THE LEGAL POSITION, I S USTAIN THE DISALLOWANCE OF RS. 1649262/- AS AN EXPENDITURE DI SALLOWANCE U/S 40(A)(IA) OF THE INCOME TAX ACT, 1961. THE APP ELLANT GETS A RELIEF OF RS. 6974551/-. ON THE OTHER HAND THE A.O. CONTENDED THAT THE WORD PAYABLE INCLUDES THE WORD PAID ALSO AND THAT IT DOES NOT MAKE ANY DIFFERENCE WHETHER THE PAYMENT IS MADE DURING THE PARTICULAR YEAR OR IN THE SUBSEQUENT YEAR. I HAVE CONSIDERED THE ARGUMENTS OF THE LEARNED COU NSEL OF THE APPELLANT AND THE FACTS OF THE CASE AND PROVISIONS OF LAW AND THE REMAND REPORT OF THE A.O ON THIS ISSUE AS WELL AS THE AFORESAID JUDGMENT OF THE JAIPUR BENCH OF I.T.A.T. IN THE CA SE OF M/S JAIPUR VIDYUT VITRAN NIGAM LIMITED VS. DICT AND MY OWN DE CISION IN THE CASE OF M/S KISHAN MAL OIL COTTON & GINNING FACTOR Y, RAMPURAPHUL (APPEAL NO. 187-IT-CIT(A)/BTI/09-10 DATED 15.04.20 10). I AGREE WITH THE APPELLANT THAT THEREFORE, HOLD THAT PROVI SIONS ARE APPLICABLE ONLY IN RESPECT OF THE EXPENDITURE I.E. CRUSHING C HARGES WHICH REMAINED PAYABLE AT THE END OF THE YEAR. AFTER PER USING RECORDS, I FIND THAT AS PER THE BALANCE-SHEET OF THE APPELLANT AT THE END OF THE YEAR, ONLY A SOME OF RS. 26245/- REMAINED PAYABLE OUT OF RS. 1461285/-. THEREFORE, THE MAXIMUM DISALLOWANCE WHICH COULD BE MADE U/S 40(A)(IA) SHOULD BE RS. 16245/-. ON THESE FACTS AN D LEGAL POSITION I SUSTAIN THE DISALLOWANCE OF RS. 26245/- AS AN EXPE NDITURE DISALLOWABLE U/S 40(A)(IA) OF THE I.T. ACT, 1961. THE APPELLAN T GETS A RELIEF OF RS. 1435040/-. 10. THE REVENUE BEING AGGRIEVED WITH THE FINDINGS OF THE LD. CIT(A), CHALLENGED THE SAME THROUGH THE STATEMENT OF FACTS AND GROUNDS OF APPEAL DATED 14.07.2010 WHICH IS REPROD UCED FOR THE SAKE OF CLARITY AS UNDER: ITA NO.449(ASR)/2013 C.O.NO.43(ASR)/2013 19 THE WORD PAYABLE INCLUDES THE WORD PAID ALSO. WHEN THE CRUSHING WORK OF THE ASSESSEES BINOLA WAS UNDERTA KEN, THE PAYMENT OF CERTAIN MONEY BECAME PAYABLE WHICH WAS SUBSEQUE NTLY PAID BY THE ASSESSEE LEAVING A PETTY BALANCE PAYABLE AS ON THE LAST DAY OF THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UND ER REPORT. THE LEGISLATURE HAS USED THE WORD PAYABLE IN THE SEN SE THAT WHENEVER A PAYMENT BECOMES DUE TO THE PERSON WHO RENDERS THE SERVICE/WORK A CERTAIN AMOUNT OF PAYMENT BECOMES PAYABLE TO THAT PERSON AND IT DOES NOT MAKE ANY DIFFERENCE WHETHER THAT PAYMENT IS PA ID DURING A PARTICULAR YEAR OR IN THE SUBSEQUENT YEAR. THE LEA RNED CIT(A) HAS NOT INTERPRETED THE PROVISIONS OF SECTION 40(A)(IA) IN BROAD SENSE, AS THE INTENTION OF LEGISLATURE IN ENACTING THESE PROVISI ONS WAS TO LEVY TAX ON THE AMOUNTS COMING DUE FROM ANY SERVICE RENDERED O N WHICH TDS WAS NOT DEDUCTED. KEEPING IN VIEW ABOVE FACTS LEARNED CIT(A) HAS ERRE D IN DELETING THE ADDITION OF RS. 14,35,040/- MADE BY TH E A.O. WITHOUT CONSIDERING THE FACTS DISCUSSED IN THE ASSESSMENT O RDER AS WELL AS REMAND REPORT DATED 26.04.2010 SUBMITTED BEFORE HIM . 11. THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED ON RECORD PAPER BOOK CONTAINING 20 PAGES DATED 23.05.2013 FOR SUBST ANTIATING THE CONTENTIONS PRIMARILY DEVOTED TO THE GROUNDS OF CR OSS OBJECTIONS DATED 01.08.2010 ADDRESSING TO THE GRANTING OF ALL OWANCE AND UPHOLDING THE FINDINGS OF THE LD. CIT(A) AND ADDIT IONALLY A VALIANT ATTEMPT MADE TO BUTTRESS THE ARGUMENTS BY RELYING U PON THE DECISION OF COORDINATE BENCH IN THE CASE OF TEJA CONSTRUCTI ONS VS. ACIT (2010) 36 DTR 220 (HYD. TRIB) AND N. RAMACHANDRA RE DDY, ITA NO.1372 OF 2007 COORDINATE BENCH ORDER DATED 6 TH MARCH, 2009 NOTICED IN PARAGRAPH 13 OF TEJA CONSTRUCTIONS CASE WHEREBY NO FACET OF CONTROVERSY OF THE ASSESSEE HAS BEEN RAISED TAK ING THROUGH VARIOUS DOCUMENTS AND MATERIAL FACTS SHIFTING THE BURDEN O F PROOF IS ON THE REVENUE QUA NON BRINGING OF EVIDENCE ON RECORD THAT SHRI BALAJI OIL MILLS IS A CONTRACTOR IN RELATION TO RESPONDENT-ASS ESSEE, HENCE NONE LIABILITY FOR DEDUCTION UNDER SECTION 194C OF THE ACT. 12. PERTINENT TO REFER THAT LABYRINTH SUBMISSIONS HAVING BEEN MADE CONTENDING THEREIN THAT ALLOWANCE IS TO BE GRANTED ACCORDING TO THE SOLITARY PROVISION OF SECTION 28 WHILE READING TH E SAME AS STAND ALONE OF SECTION DE-HORSE OTHER PROVISIONS OF THE ACT AND THUS PRAYING ITA NO.449(ASR)/2013 C.O.NO.43(ASR)/2013 20 FOR ALLOWING THE CROSS OBJECTION AND DISMISSING THE APPEAL OF THE REVENUE. 13. IN CONTRADICTION TO THE SUBMISSIONS RAISED BY T HE LD. COUNSEL FOR THE ASSESSEE (SUPRA), THE LD. DR MR. TARSEM LAL RAI SED POINT-WISE REBUTTAL ON VARIOUS FACTS OF THE CONTROVERSY WHICH CHRONOLOGICALLY RUN AS NAMELY THE CONSTITUTIONAL VALIDITY OF SECTION 40 (A)(IA) UPHELD WHILE PAYMENTS MADE WITHOUT DEDUCTING TAX AT SOURCE IN TH E DECISION IN W.T. 186 OF 2008 IN DEYS MEDICAL (U.P.) PVT. LTD. VS. UNION OF INDIA AND OTHERS (2009) 316 ITR 445 (ALL) DATED 15.02.200 8 , TUBE INVESTMENTS OF INDIA LTD. AND ANOTHER VS. ACIT IN CWP NO.33766 OF 2007 AND OTHERS REPORTED IN (2010) 325 ITR 610 ( MADRAS) DATED 29,09,2009, CIT-IV VS. SIKANDAR KHAN N. TUNVAR DAT ED 02.05.2013 IN TAX APPEAL NO.905 OF 2012 , CIT VS. (GUJ) , CIT VS. MERILYN SHIPPING & TRANSPORTS ( ITA NO.477/VIZ/2008 DATED 29 TH MARCH, 2012 (SB) AND AGAINST THE SPECIAL BENCH DECISION O F THE TRIBUNAL FINALLY THE DECISION OF HONBLE CALCUTTA HIGH COUR T IN THE CASE OF CIT VS. CRESCENT EXPORT SYNDICATE IN ITA NO. 20 OF 2013 GA 190 OF 2013 WHICH NOTICES THE DECISION OF DEYS MEDICAL (U .P.) PVT. LTD. (SUPRA). 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. IT IS PERTINENT TO MENTION THAT THE ASSESSEE HAS FAILED TO ADDRESS ANY REBUTTAL OF WHATSOEVER KIND TO THE JUDGMENTS OF HONBLE HIGH COURT OF ALLAHABAD IN THE CASE OF DEYS MEDICAL (U. P.) PVT. LTD. , HONBLE MADRAS HIGH COURT IN THE CASE OF TUBE INVE STMENTS OF INDIA LTD. AND ANOTHER VS. ACIT (SUPRA), HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT-IV VS. SIKANDARKHAN N. TUNVAR (SUPRA) AND HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. CRESCENT EXPORT SYNDICATE (SUPRA), WHICH ARE THE DECISIONS ON THE IMPUGNED IS SUES AS RAISED. THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE DECISI ON OF SPECIAL BENCH IN THE CASE OF CIT VS. MERILYN SHIPPING & TRANSPORT S (SUPRA) ONLY IN THIS REGARD BUT HAS NOT REBUTTED THE SAID DECISIONS OF THE HONBLE HIGH COURTS MENTIONED HEREINABOVE. 15. SECONDLY, REGARDING RELIANCE PLACED ON THE DE CISION OF COORDINATE BENCH OF HYDERABAD IN THE CASE OF TEJA C ONSTRUCTIONS VS. ACIT (SUPRA), WE ARE OF THE VIEW THAT THE ARGUMENTS HAVE NOT BEEN CONCLUDED TO THE LOGICAL END WHILE THE SAID ORDER W ITH GREATEST RESPECT OF THE ITAT IS DATED 23.10.2009 BEFORE THE CONSTI TUTIONAL VIRUS WERE UNDER CHALLENGE AS REVEALED THROUGH THE JUDGMENTS BEING BY THE HONBLE HIGH COURT OF ALLAHABAD IN THE CASE OF DEY S MEDICAL (U.P.) P LTD. (SUPRA) WHICH IS DATED 15.02.2008 AND JUDGM ENT OF HONBLE ITA NO.449(ASR)/2013 C.O.NO.43(ASR)/2013 21 MADRAS HIGH COURT IN THE CASE OF TUBE INVESTMENTS O F INDIA VS. ACIT (SUPRA) WHICH IS DATED 29.09.2009 AND DECISION OF ITAT, SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING & TRA NSPORTS DATED 29.03.2012 WHEREBY AT THE TIME OF CASE DISPOSAL BEF ORE US, WE HAVE THE BENEFIT OF ADDITIONAL JUDGMENT OF HONBLE GUJRA T HIGH COURT IN THE CASE OF CIT-IV VS. SIKANDARKHAN N TUNVAR AND HONBL E CALCUTTA HIGH COURT IN THE CASE OF CIT VS. CRESCENT EXPORT SYNDICATE (SUPRA). THUS, WE ARE BOUND TO FOLLOW THE LAW PREVALENT AT T HE RELEVANT DATE AND TIME. EVEN OTHERWISE, CONTROVERSY RAISED STANDS ANSWERED AGAINST THE ASSESSEE AND THEREFORE THE DEPARTMENTAL APPEAL IS ALLOWED TO THAT EXTENT WHEREBY THE SAID ASPECT OF THE FINDINGS BY THE HONBLE HIGH COURT OF CALCUTTA IN THE CASE OF CIT VS. CRESCENT E XPORT SYNDICATE ARE REPRODUCED HEREIN BELOW WHICH ARE PERTINENT FIN DING OF THE HONBLE HIGH COURT IN THE PRESENT CASE.: IN THE BACKDROP OF THESE SUBMISSIONS, HONBLE MAD RAS HIGH COURT UPHELD THE CONSTITUTIONAL VALIDITY OF THE PROVISIO NS OF SECTION 40(A)(IA) AND MADE VARIOUS OBSERVATIONS:- (I) HONBLE MADRAS HIGH COURT, INTER ALIA, NOTED THE OB SERVATIONS OF HONBLE SUPREME COURT IN THE CASE OF A.S.KRISHNA V. STATE OF MADRAS AIR 1957 SC 297 WHICH ARE AS UNDER:- IT WOULD BE QUITE AN ERRONEOUS APPROACH TO THE QUE STION TO VIEW SUCH A STATUTE NOT AS AN ORGANIC WHOLE, BUT AS A MERE COLLECTION OF SECTIONS THEN DISINTEGRATE IT INTO PA RTS, EXAMINE UNDER WHAT HEADS OF LEGISLATION THOSE PARTS WOULD S EVERALLY FALL, AND BY THAT PROCESS DETERMINE WHAT PORTIONS THEREOF ARE INTER VIRES AND WHAT ARE NOT. THUS, SECTION 40(A)(IA) COU LD NOT BE VIEWED INDEPENDENTLY AND HAD TO BE CONSIDERED ALONG WITH OTHER PROVISIONS. (II) THE PROVISIONS OF SECTION 40(A)(IA) WERE COMPARED W ITH THE PROVISIONS OF SECTION 201 OF THE INCOME TAX ACT AND , IT WAS, INTER ALIA, OBSERVED THAT AS FAR AS SECTION 201 IS CONCERNED THAT WOULD RELATE TO THE AMOUNT OF TAX THAT COULD BE DED UCTED BY WAY OF TDS. HOWEVER, AS FAR AS SECTION 40(A)(IA) IS CONCERNED, WHICH WOULD RESULT IN THE DISALLOWANCE OF WHOLE OF THE EXPENDITURE AND THEREBY THE ENTIRE SUM EXPENDED WOU LD ATTRACT ITA NO.449(ASR)/2013 C.O.NO.43(ASR)/2013 22 THE LEVY OF TAX AT A PRESCRIBED RATE WITH ALL OTHER CONDITIONS SUCH AS SURCHARGE, ETC. THUS, HONBLE MADRAS HIGH COURT HAS ALSO HELD IN PA RA 61 OF ITS JUDGMENT THAT WHOLE OF THE EXPENDITURE CLAIMED WITHOUT MAKING TDS IS TO BE DISALLOWED AND NOT ONLY PART OF THE EXPENDITURE. (III) (III) THE FINANCE BILL NO.2 OF 2004 STATES THAT THE INSER TION OF CLAUSE (IA) IN CLAUSE (A) TO SECTION 40 OF THE ACT WAS WIT H A VIEW TO AUGMENT COMPLIANCE OF TDS PROVISIONS. (IV) WHEN THE PROVISIONS AND PROCEDURES RELATING TO TDS ARE SCRUPULOUSLY APPLIED, FIRST AND FOREMOST IT ENSURES THE IDENTIFICATION OF THE PAYEES AND THEREBY NETWORK OF ASSESSEES GETS CONFIRMED. WHEN ONCE SUCH IDENTITY OF ASSESSEE S, WHO ARE IN RECEIPT OF THE INCOME CAN BE ASCERTAINED, IT WIL L ENABLE TAX COLLECTION MACHINERY TO BRING WITHIN ITS FOLD ALL S UCH PERSONS WHO ARE LIABLE TO COME WITHIN THE NETWORK OF TAXPAY ERS. THUS, IF IT IS HELD THAT THE PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE IN RESPECT OF THOSE PAYMENTS WHICH HAVE BEEN PAID WITHOUT MAKING TDS AND AT THE END OF THE YEAR NO AM OUNT IS OUTSTANDING THEN THE VERY OBJECT OF IDENTIFICATION OF PAYEES WILL GET FRUSTRATED. (V) THE LEGISLATIVE INTENT OF THE INTRODUCTION OF SECTI ON 40(A)(IA) IS IN THE LARGER PERSPECTIVE OF AUGMENTING THE VERY TD S PROVISIONS THEMSELVES. IT IS NOT MERELY RELATED TO THE COLLECTION OF TDS ONLY. (VI) THE INTENTION OF THE LEGISLATURE IS NOT TO TAX THE PAYER FOR ITS FAILURE TO DEDUCT THE TAX AT SOURCE. THE OBJECT OF INTRODUCTION OF SECTION 40(A)(I) AS WELL AS SECTION 40(A)(IA) IS TO ENSURE THAT ONE OF THE MODES OF RECOVERY AS PROVIDED IN CHAPTER XVI I-B IS SCRUPULOUSLY IMPLEMENTED WITHOUT ANY DEFAULT, IN OR DER TO AUGMENT THE SAID MODE OF RECOVERY. HONBLE MADRAS HIGH COURT, INTER ALIA, OBSERVED AT PARA 69 OF ITS JUDGMENT AS UNDER:- WITH THE PROVISO TO SECTION 40(A)(IA) THE DEDUCTIO N IN THE SUBSEQUENT YEAR BY RECTIFYING THE DEFAULT COMMITTE D IN THE MATTER OF TDS IN THE PREVIOUS YEAR, A DEFAULTING A SSESSEE CANNOT BE HEARD TO SAY THAT IRRESPECTIVE OF THE DELIBERAT E DEFAULT ITA NO.449(ASR)/2013 C.O.NO.43(ASR)/2013 23 COMMITTED BY IT IN IMPLEMENTING THE PROVISION RELA TING TO TDS, IT SHOULD BE HELD THAT A HIGHER TAX LIABILITY IS M ULCTED ON IT. HONBLE MADRAS HIGH COURT, INTER ALIA, OBSERVED IN PARA 83 OF ITS JUDGMENT AS UNDER:- AFTER ALL THE PROVISO HAS BEEN INSERTED IN ORDER T O ENSURE THAT EVEN A DEFAULTER IS NOT PUT TO SERIOUS PREJUDICE, IN AS MUCH AS, BY OPERATION OF THE SUBSTANTIVE PROVISION, THE EXP ENDITURE WHICH IS OTHERWISE ALLOWABLE AS A DEDUCTION IS DEN IED ON THE GROUND THAT THE OBLIGATION OF TDS PROVISIONS IS VI OLATED. THE LAW MAKES WHILE IMPOSING SUCH A STRINGENT RESTRICT ION WANTED TO SIMULTANEOUSLY PROVIDE SCOPE FOR THE DEFAULTER TO GAIN THE DEDUCTION BY COMPLYING WITH THE TDS PROVISION AT A LATER PINT OF TIME. THUS, IMPLIEDLY HONBLE MADRAS HIGH COURT, HAS, INTER ALIA, HELD THAT THE PROVISIONS OF SECTION 40(A)(IA) WILL BE APPLICABLE WITH RESPECT TO ENTIRE EXPENDITURE. IT IS TRUE THA T SPECIFIC ISSUE REGARDING PAID, CREDITED AND PAYABLE HAS NOT BEEN CONSIDERED BUT FROM THE JUDGMENT IT IS EVIDENT THA T IF ASSESSEES CONTENTION IS ACCEPTED THEN THE VERY OBJECT OF INC ORPORATION OF SECTION 40(A)(IA) WOULD BE FRUSTRATED. 21. IN VIEW OF ABOVE DISCUSSION, WE ANSWER THE QUESTION AS UNDER:- THE PROVISIONS OF SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961, ARE APPLICABLE NOT ONLY TO THE AMOUNT WHICH IS SHOWN A S PAYABLE ON THE DATE OF BALANCE-SHEET, BUT IT IS APPLICABLE TO SUC H EXPENDITURE, WHICH BECOME PAYABLE AT ANY TIME DURING THE RELEVANT PRE VIOUS YEAR AND WAS ACTUALLY PAID WITHIN THE PREVIOUS YEAR. IN THE RES ULT THE QUESTION IS DECIDED IN FAVOUR OF REVENUE AND AGAINST THE ASSES SEE. BEFORE DEALING WITH THE SUBMISSIONS OF THE LEARNED COUNSEL APPEARING FOR THE ASSESSEES IN BOTH THE APPEALS WE HAVE TO EXAMINE THE CORRECTNESS OF THE MAJORITY VIEWS IN THE CASE OF ME RILYN SHIPPING. WE ALREADY HAVE QUOTED EXTENSIVELY BOTH THE MAJORIT Y AND THE MINORITY VIEWS EXPRESSED IN THE AFORESAID CASE. THE MAIN THRUST OF THE MAJORITY VIEW IS BASED ON THE FACT THAT THE LEGISL ATURE HAS REPLACED ITA NO.449(ASR)/2013 C.O.NO.43(ASR)/2013 24 THE EXPRESSION AMOUNTS CREDITED OR PAID WITH THE EXPRESSION PAYABLE IN THE FINAL ENACTMENT. COMPARISON BETWEEN THE PRE-AMENDMENT AND POST AMEND MENT LAW IS PERMISSIBLE FOR THE PURPOSE OF ASCERTAINING THE MISCHIEF SOUGHT TO BE REMEDIED OR THE OBJECT SOUGHT TO BE ACHIEVED BY AN AMENDMENT. THIS IS PRECISELY WHAT WAS DONE BY THE APEX COURT I N THE CASE OF CIT VS. KELVINATOR REPORTED IN 2010(2) SCC 723. BUT THE SAME OMPARISON BETWEEN THE DRAFT AND THE ENACTED LAW IS NOT PERMIS SIBLE. NOR CAN THE DRAFT OR THE BILL BE USED FOR THE PURPOSE OF REGULA TING THE MEANING AND PURPORT OF THE ENACTED LAW. IT IS THE FINALLY ENACT ED LAW WHICH IS THE WILL OF THE LEGISLATURE. THE LEARNED TRIBUNAL FELL INTO AN ERROR IN NOT REAL IZING THIS ASPECT OF THE MATTER. THE LEARNED TRIBUNAL HELD THAT WHERE LANGUAGE IS C LEAR THE INTENTION OF THE LEGISLATURE IS TO BE GATHERED FROM THE LANGUAGE USED. HAVING HELD SO, IT WAS NOT OPEN TO SEEK TO INTERPRE T THE SECTION ON THE BASIS OF ANY COMPARISON BETWEEN THE DRAFT AND THE S ECTION ACTUALLY ENACTED NOR WAS IT OPEN TO SPECULATE AS TO THE EFFE CT OF THE SO-CALLED REPRESENTATIONS MADE BY THE PROFESSIONAL BODIES. THE LEARNED TRIBUNAL HELD THAT SECTION 40(A)(IA) O F THE ACT CREATES A LEGAL FICTION BY VIRTUE OF WHICH EVEN THE GENUINE AND ADMISSIBLE EXPENSES CLAIMED BY AN ASSESSEE UNDER TH E HEAD INCOME FROM BUSINESS AND PROFESSION IF THE ASSESSEE DOES NOT DEDUCT TDS ON SUCH EXPENSES ARE DISALLOWED. HAVING HELD SO WAS IT OPEN TO THE TRIBUNAL TO SEEK TO JUSTIFY THAT THIS FICTION CANNOT BE EXTENDED ANY FURTHER AND, T HEREFORE, CANNOT BE INVOKED BY ASSESSING OFFICER TO DISALLOW THE GENUIN E AND REASONABLE EXPENDITURE ON THE AMOUNTS OF EXPENDITURE ALREADY P AID? DOES THIS NOT AMOUNT TO DELIBERATELY READING SOMETHING IN THE LAW WHICH IS NOT THERE? WE, AS SUCH, HAVE NO DOUBT IN OUR MIND THAT THE LEA RNED TRIBUNAL REALIZED THE MEANING AND PURPORT OF SECTIO N 40(A)(IA) CORRECTLY WHEN IT HELD THAT IN CASE OF OMISSION TO DEDUCT TAX EVEN THE GENUINE AND ADMISSIBLE EXPENSES ARE TO BE DISALLOWE D. BUT THEY ITA NO.449(ASR)/2013 C.O.NO.43(ASR)/2013 25 SOUGHT TO REMOVE THE RIGOUR OF THE LAW BY HOLDING T HAT THE DISALLOWANCE SHALL BE RESTRICTED TO THE MONEY WHICH IS YET TO BE PAID. WHAT THE TRIBUNAL BY MAJORITY DID WAS TO SUPPLY THE CASUS OMISSUS WHICH WAS NOT PERMISSIBLE AND COULD ONLY HAVE BEEN DONE BY THE SUPREME COURT IN AN APPROPRIATE CASE. REFERENCE IN THIS REGARD MAY BE MADE TO THE JUDGMENT IN THE CASE OF BHUWALKA STE EL INDUSTRIES VS. BOMBAY IRON & STEEL LABOUR BOARD REPORTED IN 2010 ( 2) SCC 273. UNPROTECTED WORKER WAS FINALLY DEFINED IN SECTIO N 2 (II) OF THE MATHADI ACT AS FOLLOWS:- UNPROTECTED WORKER MEANS A MANUAL WORKER WHO IS ENGAGED OR TO BE ENGAGED IN ANY SCHEDULED EMPLOYMENT. THE CONTENTION RAISED WITH REFERENCE TO WHAT WAS TH ERE IN THE BILL WAS REJECTED BY THE SUPREME COURT BY HOLDING A S FOLLOWS:- IT MUST, AT THIS JUNCTURE, BE NOTED THAT IN SPITE OF SECTION 2(11), WHICH INCLUDED THE WORDS BUT FOR THE PROVISIONS OF THIS ACT IS NOT ADEQUATELY PROTECTED BY LEGISLATION FOR WELFARE AND BENEFITS O F THE LABOUR FORCE IN THE STATE, THESE PRECISE WORDS WERE REMOVED BY THE LEGISLATURE AND THE DEFINITION WAS MADE LIMITED AS IT HAS BEEN FINALLY LEGISLATED UPON. IT IS TO BE NOTED THAT WHEN THE BILL CAME TO BE PASSED AND RECEIVED THE ASSENT OF THE VICE- PRESIDENT ON 05-06-1969 AND WAS FIRST PUBLISHED IN THE MAHARASHTRA GOVERNMENT GAZETTE EXTRAORDINARY, PART IV ON 13-06-1969, THE AFOREMENTIONED WORDS WERE OMITTED. THEREFORE, THIS WOULD BE A CLEAR POINTER TO THE LEGISLATIVE INTENT THAT THE LEGISLATURE BEING CONSC IOUS OF THE FACT AND BEING ARMED WITH ALL THE COMMITTEE REPORTS AND ALSO BEING ARMED WITH THE FACTUAL DATA, DELIBERATELY AVOIDED THOSE W ORDS. WHAT THE APPELLANTS ARE ASKING WAS TO READ IN THAT DEFINITIO N, THESE PRECISE WORDS, WHICH WERE CONSCIOUSLY AND DELIBERATELY OMITTED FRO M THE DEFINITION. THAT WOULD AMOUNT TO SUPPLYING THE CASUS OMISSUS AND WE DO NOT THINK THAT IT IS POSSIBLE, PARTICULARLY, IN THIS CASE. THE LAW OF SUPPLYING THE CASUS OMISSUS BY THE COURTS IS EXTREM ELY CLEAR AND SETTLED THAT THOUGH THIS COURT MAY SUPPLY THE CASUS OMISSUS, IT WOULD BE IN THE RAREST OF THE RARE CASE AND THUS SUPPLYIN G OF THIS CASUS OMISSUS WOULD BE EXTREMELY NECESSARY DUE TO THE INA DVERTENT OMISSION ON THE PART OF THE LEGISLATURE. BUT, THAT IS CERTAI NLY NOT THE CASE HERE. ITA NO.449(ASR)/2013 C.O.NO.43(ASR)/2013 26 WE SHALL NOW ENDEAVOUR TO SHOW THAT NO OTHER INTERP RETATION IS POSSIBLE. THE KEY WORDS USED IN SECTION 40(A)(IA), ACCORDING TO US, ARE ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVI I B. IF THE QUESTION IS WHICH EXPENSES ARE SOUGHT TO BE DISALLOWED? TH E ANSWER IS BOUND TO BE THOSE EXPENSES ON WHICH TAX IS DEDUCTIBLE AT SO URCE UNDER CHAPTER XVII B. ONCE THIS IS REALIZED NOTHING TURNS ON THE BASIS OF THE FACT THAT THE LEGISLATURE USED THE WORD PAYABLE AND NOT PAID OR CREDITED. UNLESS ANY AMOUNT IS PAYABLE, IT CAN NEITHER BE PAID NOR CREDITED. IF AN AMOUNT HAS NEITHER BEEN PAID NOR CREDITED, THERE CAN BE NO OCCASION FOR CLAIMING ANY DEDUCTION. THE LANGUAGE USED IN THE DRAFT WAS UNCLEAR AND SUSC EPTIBLE TO GIVING MORE THAN ONE MEANING. BY LOOKING AT THE DRAFT IT C OULD BE SAID THAT THE LEGISLATURE WANTED TO TREAT THE PAYMENTS MADE OR CR EDITED IN FAVOUR OF A CONTRACTOR OR SUB-CONTRACTOR DIFFERENTLY THAN THE P AYMENTS ON ACCOUNT OF INTEREST, COMMISSION OR BROKERAGE, FEES FOR PROFESS IONAL SERVICES OR FEES FOR TECHNICAL SERVICES BECAUSE THE WORDS AMOUNTS CREDITED OR PAID WERE USED ONLY IN RELATION TO A CONTRACTOR OR SUB- CONTRACTOR. THIS DIFFERENTIAL TREATMENT WAS NOT INTENDED. THEREFORE, THE LEGISLATURE PROVIDED THAT THE AMOUNTS, ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B PAYABLE ON ACCOUNT OF INTEREST, COMMISSION OR BROKERAGE, RENT, ROYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES OR TO A CONTRACTOR OR SUB CONTRACTOR SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME OF AN ASSESSEE IN CASE HE HAS NOT DEDUCED, OR AFTER DEDUCTION HAS NOT PAID WITHIN THE SPECIFIED TIME. THE LANGUAGE USED BY THE LEGISLATURE IN THE FINALLY ENACTED LAW IS CLEAR AND UNAMBIGUOUS WHEREAS THE LANGUAGE USED IN THE BILL WAS AMBIGUOUS. A FEW WORDS ARE NOW NECESSARY TO DEAL WITH THE SUBM ISSION OF MR. BAGCHI AND MS. ROYCHOWDHURI. THERE CAN BE NO DENIAL THAT THE PROVISION IN QUESTION IS HARSH. BUT THAT IS NO GROUND TO READ THE SAME IN A MANNER WHICH WAS NOT INTENDED BY THE LEGISLATURE. THIS IS OUR ANSWER TO THE SUBMISSION OF MR. BAGCHI. THE SUBMISSION OF MS. ROYCHOWDHURI THAT THE SECOND PROVISO SOUGHT TO BECOME EFFECTIVE FROM 1ST APRIL, 2013 SHOULD BE HELD TO HAVE ALREADY BECOME OPERATIVE PRIOR TO THE APPOINTED DATE CANNOT ALSO BE ACCEDED TO FOR THE SAME REASON INDICATED ABOVE. THE LAW WAS DELIBERATELY MADE HARSH TO ITA NO.449(ASR)/2013 C.O.NO.43(ASR)/2013 27 SECURE COMPLIANCE OF THE PROVISIONS REQUIRING DEDUCTIONS OF TAX AT SOURCE. IT IS NOT THE CASE OF AN INADVERTENT ERROR. FOR THE REASONS DISCUSSED ABOVE, WE ARE OF THE OPIN ION THAT THE MAJORITY VIEWS EXPRESSED IN THE CASE OF MERILYN SHI PPING & TRANSPORTS ARE NOT ACCEPTABLE. THE SUBMISSIONS ADVANCED BY LEARNED ADVOCATES HAVE ALREADY BEEN DEALT WITH AND REJECTED. THE APPEAL IS, THUS, ALLOWED IN FAVOUR OF THE REVE NUE. 16. IT WOULD BE RELEVANT TO DEAL WITH THE ARGUMEN TS OF THE LD. COUNSEL OF THE ASSESSEE WHICH WERE PRESSED REPEATED LY THAT THE PROVISIONS OF SECTION 28 STAND ALONE, GRANT THE ALLOWANCE TO THE ASSESSEE AND THIS CLAIM HAS BEEN MADE VALIDLY THU S ELIGIBLE FOR ALLOWANCE NEVERTHELESS NO DEDUCTION OF TAX MADE. I N THIS CONTEXT, WE REFER THAT THE SAID ARGUMENTS BY LD. AR ARE BEREF ET OF MERITS AND SUBSTANCE SINCE THE ACT HAS TO BE READ AS AN INTEG RATED CODE AND NOT TO THE CHOICE OF THE ASSESSEE BEING PICK AND CHOOSE TO THE PROVISIONS OF LAW SUITING THE REQUIREMENTS OF A LITIGANT ANDS THE SIMILAR ARGUMENT HAS BEEN DEALT IN THE AFORESAID JUDGMENT OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. CRESCENT EXPORT SYNDIC ATE (SUPRA) AND WHICH FINDINGS ARE WHILE NOTICING THE JUDGMENT OF H ONBLE SUPREME COURT IN A.S. KRISHNA VS. STATE OF MADRAS REPORT ED IN AIR 1957 SCC 297 (SUPRA). 17. THAT THE SAID ARGUMENT IS HEREBY REJECTED AND E VEN THE HONBLE SUPREME COURT IN THE CASE OF V.N. SHRIKHANDE (DR.) VS. ANITA SENA FERNANDES (2011) 1 SCC 53 AT PARA 22 WHILE NOTICING THE JUDGMENT IN THE CASE OF RBI V. PEERLESS GENERAL FINANCE & INVES TMENT CO. LTD; (1987) 1SCC 450 AT PARA 33 WHERE IT HAS BEEN HELD A S UNDER: IN RBI VS. PEERLESS GENERAL FINANCE & INVESTMENT C O. LTD. CHENNAPA REDYY, J. REFERRED TO THE RULE OF CONTEXTU AL INTERPRETATION AND OBSERVED : (SCC P.450 PARA 33): 33. INTERPRETATION MUST DEPEND ON TH TEXT AND THE CONTEXT. THEY ARE THE BASES OF INTERPRETATION. ONE MAY WELL SAY IF TH E TEXT IS THE TEXTURE, CONTEXT IS WHAT GIVES THE COLOUR. NEITHER CAN BE IG NORED. BOTH ARE ITA NO.449(ASR)/2013 C.O.NO.43(ASR)/2013 28 IMPORTANT. THAT INTERPRETATION IS BEST WHICH MAKES THE TEXTUAL INTERPRETATION MATCH THE CONTEXTUAL. A STATUTE IS B EST INTERPRETED WHEN WE KNOW WHY IT WAS ENACTED. WITH THIS KNOWLEDGE, TH E STATUTE MUST BE READ FIRST AS A WHOLE AND THEN SECTION BY SECTIO N, CLAUSE BY CLAUSE, PHRASE BY PHRASE AND WORD BY WORD. IF A STATUTE IS LOOKED AT, IN THE CONTEXT OF ITS ENACTMENT, WITH THE GLASSES OF THE S TATUTE MAKER, PROVIDED BY SUCH CONTEXT, ITS SCHEME, THE SECTIONS, CLAUSES, PHRASES AND WORDS MAY TAKE COLOUR AND APPEAR DIFFERENT THA N WHEN THE STATUTE IS LOOKED AT WITHOUT THE GLASSES PROVIDED BY THE CO NTEXT. WITH THESE GLASSES, WE MUST LOOK AT THE ACT AS A WHOLE AND DIS COVER WHAT EACH SECTION, EACH CLAUSE, EACH PHRASE AND EACH WORD IS MEANT AND DESIGNED TO SAY AS TO FIT INTO THE SCHEME OF THE EN TIRE ACT. NO PART OF A STATUTE AND NO WORD OF A STATUTE CAN BE CONSTRUED I N ISOLATION. 18. FURTHER, WE SHALL ADD THAT PROVISIONS OF SECTIO N 28 ARE CONFINED TO CHARGING OF INCOMES UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION AND IT IS MOST PERTINENT TO REFER TH AT THE PROVISIONS OF SECTION 29 REFERS TO THE METHODOLOGY OF COMPUTING T HE SAID CHARGE FOR COVERING THE PROVISION CONTAINED IN SECTION 30 TO 4 3D, WHEREIN THE SAID PROVISION U/S 40(A)(IA) IS INCLUSIVE THEREIN. AND IT IS EVEN OTHERWISE RELEVANT TO MENTION THAT THE PROVISIONS O F SECTION 40 OPEN WITH WORD NOTWITHSTANDING ANYTHING TO THE CONTRAR Y IN SECTION 30 TO 38 WHEREIN THE AMOUNTS NOT DEDUCTIBLE ARE REFERRED TO U/S 40(A)(IA). THE SAID PROVISION COMMENCE WITH NON-OBSTANTE CLAUS E AND REFER THE PROVISION U/S 30 TO 38 WITH WHERE INTO UNDER THE GE NERAL CLAIM OF THE EXPENSES, THE SAID ALLOWANCE NOT TO BE GRANTED, SPE CIFICALLY WHERE A SPECIAL PROVISION FOR DISALLOWANCE HAS BEEN EXTRACT ED UNDER THE STATUTE. 19. THEREFORE, IN VIEW OF OUR FINDINGS HEREINABOVE , GROUNDS RAISED BY THE ASSESSEE IN ITS C.O. HAVE NO MERIT AND THERE FORE, THE SAME ARE DISMISSED AND THE APPEAL OF THE REVENUE IS ALLOWED. 20. IN THE RESULT, THE APPEAL OF THE REVENUE IN IT A NO.326(ASR)/2010 IS ALLOWED AND C.O. NO.19(ASR)/20 10 OF THE ASSESSEE IS DISMISSED. ITA NO.449(ASR)/2013 C.O.NO.43(ASR)/2013 29 8.1. THE ISSUE IN THE PRESENT APPEAL IS IDENTICAL T O THE ASSESSEE IN THE CASE OF M/S. MAHAVIR COTTON TRADERS (SUPRA) DECIDED BY T HIS BENCH VIDE ORDER DATED 30.05.2013 AND THEREFORE, THE ORDER OF THE LD . CIT(A) IS REVERSED AND THAT OF THE A.O. IS RESTORED. ACCORDINGLY, GROUND N O.2 OF THE REVENUE IS ALLOWED 9. AS REGARDS GROUND NO. 2 OF THE CO OF THE ASSESS EE WITH REGARD TO ADJUDICATION OF THE ISSUE RELATING TO APPLICABILITY OF SECTION 40(A)(IA), THE LD. COUNSEL FOR THE ASSESSEE ARGUED THAT THE LD. CIT(A) HAS NOT DECIDED THE ISSUED ON MERIT. SINCE THE LD. CIT(A) HAS DECIDED T HE LEGAL ISSUE IN FAVOUR OF THE ASSESSEE, THEREFORE, THE LD. CIT(A) AT PAGE 10 OF HIS ORDER OBSERVED AS UNDER: SINCE I HAVE DECIDED THE APPEAL ON LEGAL ISSUE, I HAVE NEITHER DISCUSSED NOR ADJUDICATED THE CONTENTIONS OF THE A /R OF THE APPELLANT THAT THE APPELLANT WAS NOT LIABLE TO DED UCT TAX AT SOURCE FROM THE EXPENDITURE RELATING TO EXPORT. 9.1. SINCE THE ISSUE DECIDED BY THE LD. CIT(A) IN F AVOUR OF THE ASSESSEE HAS BEEN REVERSED BY US HEREINABOVE, IN VIEW OF OUR DECISION IN THE CASE OF M/S. MAHAVIR COTTON TRADERS (SUPRA), THEREFORE, THE LD. CIT(A) IS REQUIRED TO DECIDE THE ISSUE ON MERIT. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ISSUE IS SENT TO THE FILE OF THE LD. CIT( A) TO DECIDE THE SAME ON MERIT ONLY AS RAISED IN THE C.O. OF THE ASSESSEE AF TER PROVIDING ADEQUATE ITA NO.449(ASR)/2013 C.O.NO.43(ASR)/2013 30 OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THUS, G ROUND NO.2 OF THE C.O. IS ALLOWED FOR STATISTICAL PURPOSES. 10. AS REGARDS GROUND NO.3 OF THE REVENUE, THE BRIE F FACTS AS APPEARING IN AOS ORDER IN PAGE 11, PARA 5 ARE REPRODUCED FOR TH E SAKE OF CONVENIENCE AS UNDER: IT IS SEEN FROM THE PROFIT & LOSS ACCOUNT ENCLOSED WITH THE FORM NO.3CD THAT THE ASSESSEE HAS SHOWN OTHER INCOME OF RS.53,20,856/- WHICH INCLUDE THE INCOME UNDER THE FOLLOWING HEADS : GODOWN RENT RS. 2,750/- MUDAT RS. 25,581/- WEIGHT BRIDGE INCOME RS.2,13,945/- COMMISSION AND DAMI RS.1,11,795/- PRESS CHARGES RS.3,21,200/- INTEREST RECEIVED RS.17,26,591/- DUTY DRAW BACK RS.29,13,468/- THE ASSESSEE HAS CLAIMED DEDUCTION U/S 80IB @ 30% ON THE GROSS TOTAL INCOME OF RS.65,40,056/- INCLUDING THE AFORESAID AMOUNT OF OTHER INCOME. ON EXAMINATION, IT IS FOUND THAT T HE SAID INCOME CANNOT BE SAID TO BE DERIVED FROM THE INDUSTRIAL UN DERTAKING OR IN CASE OF PRESS CHARGES, THE INCOME CANNOT BE SAID TO BE FROM MANUFACTURING OR PRODUCTION OF ARTICLES OR THINGS A ND THEREFORE, DEDUCTION UNDER SAID SECTION IS NOT ALLOWABLE ON T HE SAME. REASONS AS TO WHY THE SAID INCOME IS NOT ELIGIBLE FOR DEDUC TION U/S 80IB IS GIVEN BELOW. (A) THE NATURE OF INCOME FROM GODOWN RENT, MODAT, WEIGH BRIDGE INCOME, COMMISSION AND DAMI SHOWS THAT THEY ARE NOT DERIVED FROM INDUSTRIAL UNDERTAKING. (B) PRESS CHARGES THE ASSESSEE HAS DONE JOB WORK OF PRESSING OF C OTTON FOR OTHER PARTIES.THE PRESSING OF COTTON CANNOT BE SAID TO BE MANUFACTURING OR PRODUCTION OF ARTICLES OR THINGS. (C) INTEREST RECEIVED ITA NO.449(ASR)/2013 C.O.NO.43(ASR)/2013 31 IT IS SEEN THAT THE INTEREST HAS BEEN RECEIVED MAI NLY FROM TRADE DEBTORS. THIS INCOME IS NOT ELIGIBLE FOR DEDUCTION U/S 80IB . RELIANCE IS PLACED ON THE JUDGMENT OF ITAT AHMEDABAD IN THE CASE OF NIRMA INDUSTRIES LTD. VS. ACIT (ITAT AHD-SB) 95 ITD 199. (D) DUTY DRAWBACK. DEPB/DUTY DRAW BACK REMISSIONS ARE INCENTIVES WHIC H FLOW FROM THE SCHEMES FRAMED BY THE CENTRAL GOVERNMENT O R FROM SECTION 75 OF THE CUSTOMS ACT, 1962. HENCE, INCENTIVE PROFI TS ARE NOT PROFITS ARE NOT PROFITS DERIVED FROM ELIGIBLE BUSINESS U/S 80-IB. THEY BELONG TO THE CATEGORY OF ANCILLARY PROFITS OF SUCH UNDERT AKINGS. ANALYZING THE CONCEPT OF REMISSION OF DUTY DRAW BACK AND DEPB , IT IS EVIDENT THAT THE REMISSION OF DUTY IS ON ACCOUNT OF THE STA TUTORY/POLICY PROVISIONS IN THE CUSTOMS ACT/SCHEME(S) FRAMED BY T HE GOVERNMENT OF INDIA. IN THE CIRCUMSTANCES, THE PROFITS DERIVED BY WAY OF SUCH INCENTIVES DO NOT FALL WITHIN THE EXPRESSION PROFI T DERIVED FROM INDUSTRIAL UNDERTAKING IN SECTION 80-IB. RELIANCE I S PLACED ON THE JUDGMENT OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF I) LIBERTY INDIA VS. CIT (P&H) 293 ITR 520 II) PARAMOUNT IMPEX VS. CIT (P&H) 165 TAXMAN 181 III) CIT VS. LUKHWINDER SINGH (P&H) 165 TAXMAN 587 IN VIEW OF THE ABOVE, DEDUCTION U/S 80IB ON THE AF ORESAID AMOUNT WHICH COMES TO RS.15,94,600/- (30% OF RS.53 ,15,330/-) IS DISALLOWED AND ADDITION OF SAID AMOUNT IS MADE IN T HE INCOME RETURNED. 11. THE LD. CIT(A) DIRECTED THE AO TO ALLOW DEDUCTI ON U/S 80IB OF THE ACT, IN ACCORDANCE WITH THE CHART FURNISHED BY THE LD. A/R OF THE ASSESSEE. 12. THE LD. DR ARGUED AT THE OUTSET, THAT THE ASSES SEE HAD NOT CONTESTED GODOWN RENT AMOUNTING TO RS.2750/-, WEIGHT BRIDGE I NCOME AMOUNTING TO RS.2,13,945/- AND DUTY DRAW BACK AMOUNTING TO RS.29 ,13,468/-, TOTALING RS.31,30,163/-. THEREFORE, AT THE MOST, THE ASSESSE E WAS ENTITLED FOR ITA NO.449(ASR)/2013 C.O.NO.43(ASR)/2013 32 DEDUCTION U/S 80IB OF AN AMOUNT OF RS.21,85,167/- I .E. RS.53,15,330/- AS CLAIMED BY THE ASSESSEE (-) RS.31,30,163/- WHICH WE RE NOT CONTESTED BEFORE THE LD. CIT(A), SINCE THE LD. A/R HAD CONCEDED THAT NO PART NO PART OF THE INDUSTRIAL UNDERTAKING WITH REGARD TO GODOWN RENT, WEIGHBRIDGE INCOME AND DUTY DRAW BACK ARE NOT PART OF THE INCOME OF INDUST RIAL UNDERTAKING AND THEREFORE, NO DEDUCTION U/S 80IB OF THE ACT IS ALLO WABLE ON SUCH INCOME. 13. AS REGARDS THE CHART SUBMITTED BY THE LD. COUNS EL FOR THE ASSESSEE BEFORE THE LD. CIT(A), WHICH IS PART OF THE WRITTEN SUBMISSIONS BEFORE THE LD. CIT(A), DOES NOT INCLUDE DUTY DRAW BACK OF RS.29,1 3,468/- AND THEREFORE, TO THAT EXTENT THE CHART IS MIS-REPRESENTATION BEFO RE THE LD. CIT(A). IF THE SAID AMOUNT OF DUTY DRAW BACK OF RS.29,13,468/- IS TAKEN INTO CONSIDERATION AND THE CHART SUBMITTED BY THE LD. A/R BEFORE THE LD. C IT(A) IS ACCEPTED AS CORRECT, EVEN THEN THE AMOUNT ELIGIBLE FOR DEDUCTIO N U/S 80IB OF THE ACT, SHALL BE AN AMOUNT OF RS.654946/- ON WHICH DEDUCTIO N U/S 80IB @ 30% RS. 196483/- SHALL BE ELIGIBLE AS AGAINST RS.15,94,600/ - DISALLOWED BY THE AO AND THE BALANCE OF RS.13,98,177/- STILL WILL BE DIS ALLOWED EVEN IF THE VERSION OF THE LD. CIT(A) AFTER MAKING RECTIFICATION IS ACC EPTED, WHICH IN FACT, IS AN AMOUNT WHICH HAS BEEN CONCEDED BY THE LD. COUNSEL F OR THE ASSESSEE BEFORE THE LD. CIT(A) WITH REGARD TO THE DUTY DRAW BACK. THOUGH THE LD. DR RELIED ITA NO.449(ASR)/2013 C.O.NO.43(ASR)/2013 33 UPON THE ORDER OF THE AO, WHICH HAS NO DEFECTS AND THEREFORE, PRAYED TO ALLOW THE APPEAL OF THE REVENUE. 14. THE LD. COUNSEL FOR THE ASSESSEE, MR. PADAM BAH L, CA, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE LD. CIT(A) IN TH IS REGARD. 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE H AD CONCEDED THAT HE DOES NOT WANT TO CONTEST GODOWN RENT, WEIGHT BRIDGE INCO ME AND DUTY DRAW BACK SINCE THEY ARE NOT PART OF THE INCOME OF THE INDUST RIAL UNDERTAKING AND THEREFORE, DEDUCTION U/S 80IB IS NOT ALLOWABLE ON T HIS INCOME. THE LD. COUNSEL MR. PADAM BAHL, CA APPEARING ON BEHALF OF T HE ASSESSEE WHILE ARGUING THE MATTER BEFORE THIS BENCH ALSO AGAIN CON CEDED THIS FACT THAT THE GODOWN RENT AMOUNT TO RS.2750/-, WEIGHT BRIDGE INCO ME AMOUNTING TO RS.2,13,945/- AND DUTY DRAW BACK AMOUNTING TO RS.29 ,13,468/- WHICH TOTALS RS.31,30,163/- IS NOT PART OF INCOME ELIGIBLE FOR D EDUCTION U/S 80IB OF THE ACT. AS PER PROFIT & LOSS ACCOUNT, THE ASSESSEE DEC LARED OTHER INCOME OF RS.53,15,330/- OUT OF RS.53,20,856/- WHICH ARE PART OF AOS ORDER AT PAGE 12 REPRODUCED HEREINABOVE, WHICH INCLUDES GODOWN RE NT, MUDAT , WEIGHT BRIDGE INCOME, COMMISSION AND DAMI, PRESS CHARGES, INTEREST RECEIVED AND DUTY DRAW BACK. THE ASSESSEE HAS CLAIMED DEDUCTION U/S 80IB @ 30% ON THE TOTAL GROSS INCOME OF RS.6541057/- WHICH INCOME IN FACT, HAS BEEN REVISED ITA NO.449(ASR)/2013 C.O.NO.43(ASR)/2013 34 BY THE ASSESSEE BY SUBMITTING A CHART AT RS.654105 7/- INSTEAD OF RS.654656/-. THE CHART FOR THE SAKE OF CONVENIENCE WHICH HAS BEEN REVISED BY THE ASSESSEE BEFORE THE LD. CIT(A) IS REPRODUCED AS UNDER: COMPUTATION OF ELIGIBLE INCOME U/S 80IB TOTAL INCOME AS PER STATUTORY CHART 6541057.00 LESS INCOME DERIVED FROM ACTIVITIES OTHER THAN INDUSTRIES COTTON EXPORT A/C 2972643.00 COTTON SEED TRADE 0.00 COTTON SEED CAKE 0.00 2972643.00 WEIGHT BRIDGE 213945.00 GODOWN RENT 2750.00 216695.00 3189338.00 LESS PROPORTIONATE EXPENSES ATTRIBUTABLE TO TRADE AS PER CHART 3821567.00 INCOME ELIGIBLE FOR DEDUCTION U/S 80IB 6541057.00 ON PERUSAL OF THE SAID CHART, IT IS EVIDENT THAT TH E ASSESSEE HAS NOT INCLUDED THE DUTY DRAW BACK OF RS.29,13,468/- ALONGWITH WEIG HT BRIDGE INCOME AND GODOWN RENT INCOME OF RS.2,13,945/- AND RS.2750/- W HICH TOTALS RS.2,16,695/-. THIS AMOUNT OF RS.2,16,695/- IN FACT , SHOULD HAVE BEEN RS.31,30,163/- AND ACCORDINGLY IF THE SAID CHART I S ACCEPTED, THE SUBMISSION OF THE LD. DR IS FOUND CORRECT THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IB FOR AN AMOUNT OF RS.1,96,483/- AGAINST THE DIS ALLOWANCE OF RS.15,94,600/- MADE BY THE AO IN HIS ORDER REPRODU CED HEREINABOVE. THE LD. CIT(A) HAS NOT LOOKED INTO THIS ASPECT CAREFUL LY AND PROPERLY. IT WILL BE ITA NO.449(ASR)/2013 C.O.NO.43(ASR)/2013 35 IN THE INTEREST OF JUSTICE IF THE MATTER IS EXAMIN ED IN THIS PROSPECT, AS PER OUR FINDINGS HEREINABOVE OR ANY OTHER SUBMISSION MADE BY THE LD. COUNSEL FOR THE ASSESSEE IN THIS REGARD. THE ISSUE IS, THEREFOR E, SENT TO THE FILE OF THE LD. CIT(A), WHO WILL DECIDE THE ISSUE AFRESH IN VIEW OF OUR FINDINGS HEREINABOVE BUT BY GIVING ADEQUATE OPPORTUNITY OF BEING HEARD T O THE ASSESSEE. THE ASSESSEE SHOULD BE ALLOWED TO GIVE ANY FRESH EXPLAN ATION IN SUPPORT OF ITS CLAIM ACCORDINGLY, GROUND NO.3 OF THE REVENUE IS AL LOWED FOR STATISTICAL PURPOSES. 16. IN THE RESULT, BOTH THE APPEAL FILED BY THE REV ENUE IN ITA NO.449(ASR)/2013 AND C.O.NO.43(ASR)/2013 OF THE AS SESSEE ARE PARTLY ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON 13TH DECEMBER., 2013. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 13TH DECEMBER, 2013 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. V.R.A. COTTON MILLS PVT. LTD. ABO HAR. 2. THE ACIT, CIRCLE-II, BATHINDA. 3. THE CIT(A), BATHINDA. 4. THE CIT, BATHINDA.S 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL,